How many smart people does one have to hear providing the same message before you start to believe ? Because there are a lot of experienced investors suggesting that American Blue Chips are very, very attractive right now.
Bill Miller was one. He claimed they were “The Opportunity of a Lifetime”
http://www.gurufocus.com/news.php?id=100675
Jeremy Grantham as well. And he doesn’t like anything.
http://www.gurufocus.com/news.php?id=100763
Now Jim Grant in his recent Grant’s Interest Rate Observer is saying the same thing.
Grant compares their price to US Treasuries.
Per Grant "We've come to favor the 'risky' equity of Johnson & Johnson...over any long dated 'safe' claim on the US Treasury," He continues "What's 'risky' and what's 'safe' is a question that time alone will answer. Ten years from now, we hazard, somebody is going to be very surprised...
Hard to argue with him. Look at a few dividend yields from some of the most admired companies today:
JNJ – 3.7%
XOM – 2.9%
KO – 3.14%
MSFT – 2.09%
Compare that to what you are earning on Treasuries and then consider that these companies are also buying back stock.
Grant singles out JNJ in particular.
“Johnson & Johnson is one of the sturdiest oaks on the Wall Street chaparral….it has been around since 1887,…when Grover Cleveland, a gold-standard man, was in the White House. The company grew up in a monetary turmoil of the 1890s. It survived the dollar devaluation of 1933-34 and every subsequent monetary system including the interwar gold-exchange standard in the postwar Bretton Woods regime...J&J operates in 60 countries (slightly more than half of its sales come from abroad) and employs 115,500 people. In 2009, sales totaled $61.9 billion..."
Grant also notes that JNJ just raised its dividend for the 48th consecutive year. And notes that since 1980 JNJ average PE multiple has been 20.8. Currently it is at approximately 12 times trailing earnings. It also has an attractive yield and is one of only four AAA rated companies left in the United States.
Grant’s final observation is that currently "immense, fast-growing, well-financed, world beating enterprises are for some reason regarded by the mass of investors as a little less desirable than the 10-year Treasury."
At the very least I’d argue that a person isn’t going to lose any money today investing in a basket of the largest blue chips. But it is important to remember that these mispricings can last for much longer than expected.
Bill Miller was one. He claimed they were “The Opportunity of a Lifetime”
http://www.gurufocus.com/news.php?id=100675
Jeremy Grantham as well. And he doesn’t like anything.
http://www.gurufocus.com/news.php?id=100763
Now Jim Grant in his recent Grant’s Interest Rate Observer is saying the same thing.
Grant compares their price to US Treasuries.
Per Grant "We've come to favor the 'risky' equity of Johnson & Johnson...over any long dated 'safe' claim on the US Treasury," He continues "What's 'risky' and what's 'safe' is a question that time alone will answer. Ten years from now, we hazard, somebody is going to be very surprised...
Hard to argue with him. Look at a few dividend yields from some of the most admired companies today:
JNJ – 3.7%
XOM – 2.9%
KO – 3.14%
MSFT – 2.09%
Compare that to what you are earning on Treasuries and then consider that these companies are also buying back stock.
Grant singles out JNJ in particular.
“Johnson & Johnson is one of the sturdiest oaks on the Wall Street chaparral….it has been around since 1887,…when Grover Cleveland, a gold-standard man, was in the White House. The company grew up in a monetary turmoil of the 1890s. It survived the dollar devaluation of 1933-34 and every subsequent monetary system including the interwar gold-exchange standard in the postwar Bretton Woods regime...J&J operates in 60 countries (slightly more than half of its sales come from abroad) and employs 115,500 people. In 2009, sales totaled $61.9 billion..."
Grant also notes that JNJ just raised its dividend for the 48th consecutive year. And notes that since 1980 JNJ average PE multiple has been 20.8. Currently it is at approximately 12 times trailing earnings. It also has an attractive yield and is one of only four AAA rated companies left in the United States.
Grant’s final observation is that currently "immense, fast-growing, well-financed, world beating enterprises are for some reason regarded by the mass of investors as a little less desirable than the 10-year Treasury."
At the very least I’d argue that a person isn’t going to lose any money today investing in a basket of the largest blue chips. But it is important to remember that these mispricings can last for much longer than expected.
