Fidelity Contrafund: Fantastic Blue-Chip Fund

The Fidelity Contrafund (FCNTX) has delivered 12.1% annual returns since William Danoff took over the helm of the fund on September 17, 1990. This guy knows how to put together a blue-chip stock portfolio. Because the Fidelity Contrafund is so popular, it has seen its assets balloon to over $100 billion. That usually makes me nervous, as the universe of potential stock selections starts to diminish rapidly when you have over tens of billions of dollars to manage.

The great challenge for the Fidelity Contrafund is that it has the Warren Buffett problem–you are almost trapped by your own success because you have to try and beat the market by selecting among the universe of stocks that are the most highly covered, most liquid, and most likely to have efficient pricing out of all publicly traded stocks.

And yet, Danoff has been able to stuff the Fidelity Contrafund with some … Read the rest of this article!

The Vanguard REIT: Why Buy It?

The Vanguard REIT index fund, ticker symbol VGSIX, has delivered 10.76% annual returns since its inception on May 13, 1996. The Vanguard REIT paid out $1 per share last year in distributions, with some of the payments being dividends (cash generated from the business) and some being returns of capital (non-taxable even in a taxable account until the amount of return of capital exceeds the original investment; at current rates, you wouldn’t have to worry about paying a return on capital tax unless you held this fund in a taxable account for over fifty years).

The total amount of cash that a Vanguard REIT investor receives over the full year is currently 4.16% given the market price of $24.02 for the fund shares. For a lot of people, REIT investing is an area where it can make sense to go the index fund route because route because the quality of … Read the rest of this article!

The Coca-Cola Dividend: My Prediction

The Coca-Cola dividend annual raise is one of the few traditions in corporate America that happens with generational predictable regularity. Every February since 1963, the Coca-Cola dividend has been raised. And even before that, the Coca-Cola dividend had been at least maintained every year dating back to the 1920 IPO. In recent years, Coca-Cola has gotten into the habit of raising its dividend on the third Thursday of the month. That means there is a quite high probability that the Coca-Cola Board of Directors will raise the Coca-Cola dividend this Thursday, February 18th.

The conventional wisdom is that Coca-Cola will need to relax from its ten-year record of 9.5% annual dividend growth and reduce its dividend payout ratio a bit. There is some truth to this consensus, to a point. It is factually correct to point out that Coca-Cola’s dividend has increased from the 45% to 50% in the early … Read the rest of this article!

VGENX: Vanguard Energy’s Historical Performance

I’ve been looking at the Vanguard Energy Fund (VGENX) as part of my current studies on sector specific funds, and have been pleasantly surprised by the historical performance of the fund. Since 1984, it has beaten the S&P 500 by about a percentage point and delivered returns slightly north of 10% annually to investors.

This historical outperformance is impressive given the sharp decline in the fund’s performance since June 20, 2014. That was the day it hit a high of $77.38, and the Vanguard Energy Fund (VGENX) has since fallen to $38.32 per share. Even though the fund came in existence back in 1983, total returns still take a sharp hit when the measuring period includes a period towards the bottom of the business cycle. If someone bought at the May launch and sold in June 2014 at the thirty-year mark, the annual returns would be nearly 13%. Instead, you … Read the rest of this article!

The Vanguard Health Care Fund

Although Vanguard has developed a reputation for its index funds, it actually has almost ⅓ of its assets under management for active funds with stock pickers. What has caught my attention recently is that the Vanguard Health Care Fund (VGHCX) has recently fallen in price. Back in December, Vanguard Health Care traded at $232 per share and has since come down in price to $190 per share as of Friday’s closing at $190.

I pay attention price declines in the valuation of health care stocks because of Dr. Jeremy Siegel’s research documenting 13% annual returns for healthcare investors between 1956 and 2003, second only to the tobacco sector of that time frame. The profit margins in the sector are enormous, and the only recurring risk for investors is what I call the “Pfizer” effect–the rebasing of earnings that occurs when cash cows like Lipitor lose patent exclusivity and profits fall … Read the rest of this article!