|
The extensive reach of the U.S. federal bureaucracy is felt
nowhere as acutely as in the financial sector. Nothing is
more regulated than Wall Street. An alphabet soup of federal
agencies is charged with ensuring the health of the nation's
financial system.
A big part of that is ensuring that the stock market is
fair, and that's where the SEC comes in.
Now, you may be surprised to learn that regulation of
the stock market is relatively new. The New York Stock
Exchange traces its roots to the "Buttonwood Agreement,"
which was signed May 17, 1792, when 24 stock brokers met
under a buttonwood (or sycamore) to create a stock market.
The SEC was established in more than 140 years later, in
1934, as part of Franklin Delano Roosevelt's New Deal.
Many of the SEC's rules, in fact, still date to the
original 1934 act. Brokers and financial advisers are still
tested on it, and on other legislation passed the year
before. The 1933 act, is it is called, was designed to
bolster public confidence in the stock market, which was
badly shaken after the 1929 crash that precipitated the
Great Depression.
Shedding a Light on Insider Trades
The stock market was a very different place in those
days -- a rough and tumble world where cunning operators
could make fortunes in less than honorable ways, such as
when corporate directors would "short" stock -- that is, bet
that the price would go down -- based on knowledge that no
one else had. Wall Street lore is full of this.
But the SEC put a stop to that, and today, company
insiders like officers and directors must disclose any
transactions involving their companies' shares. If the CEO
is selling shares of the company, then the public has a
right to be informed of that. The investors that provide the
capital companies need have a right to a level playing
field.
Which brings me -- through two centuries of history and
thousands of pages of regulations -- to my point. The SEC is
an absolute treasure trove of information that investors can
profit from. The data is so easy to find and so easy to use
that it should be part of every investor's toolkit.
It works like this: Say you're an officer of a public
company and you want to buy shares in your company. Maybe
you're confidant in the business and think the price is low.
Maybe you're just cashing in an executive stock option
that's part of your compensation package. No matter what the
reason, an insider shouldn't just pick up his phone and call
his broker. The first call needs to be to a lawyer, who will
prepare a Form 4 filing that must be filed within a very
short window to inform the public of the trade.
Those of you who have read this newsletter for a while
might now that I am a fan of stock screeners, particularly
the powerful screener available through the Bloomberg
Professional Service. This tool is based on the best
financial database in the world and allows investors to
search using hundreds of metrics, some common, some very
detailed. I like to run tight screens: I don't want to see
100 companies, I want to see a half dozen or fewer. The more
specific the screen, the more it tells you.
Recently, I wrote an article called
The Safest
Dividend in the Dow,
where I
walked investors through the members of the blue-chip
average to find who's payout was the best -- not necessarily
whose was largest, but which company offered the most
dependable payout. This got me interested in looking at very
large companies that pay very high dividends. So I screened
for U.S. companies with a market cap higher than $30 billion
and a payout of better than 6%.
There were four companies.
One of them really caught my eye -- Bristol Myers
Squibb (NYSE: BMY). The company has a market cap of about $40 billion
and pays a 6.3% dividend, almost twice the S&P average.
When I was an editor on the business desk of the
Star-Ledger, the largest newspaper in New Jersey, one of our
strongest coverage areas was the state's many large
pharmaceutical companies. The paper's two full-time pharma
reporters broke all kinds of news about these important
corporations and the medicines they make. And I came to have
a lot of respect for Bristol, which has facilities all over
the Garden State and makes heart medicines like Plavix, the
psychiatric drug Abilify and a host of life-saving cancer
drugs.
So, since the company met my screen and was one with
which I had some familiarity, I was predisposed to like the
idea of buying some BMY shares, which not only sport the
nice dividend but also seem undervalued.
Using the Government's Light to Profit
But let me come full circle and tell you what I found
at the SEC. Company insiders are buying the stock, and not
just a little. In late April, two insiders -- both executive
vice presidents -- bought a total of $768,850 in stock. One
of the insiders, Hean-Marc Huet, is the company's CFO. The
other, Eliot Sigal, is the head of research and development.
Now, look, you can run all the sophisticated models you
want to determine what stocks you want to buy. But when the
company's top number cruncher and its head researcher --
both pretty clear-eyed folks, I'd imagine -- start buying
their own stock, it tells me something. And this information
is brought to you, for free, by the Uncle Sam's Securities
and Exchange Commission.
Even Better Ways to Profit From the Government
The federal government's reach is broad and extends to
all sectors of the economy. We all know that. And we've all
seen reports in the past year that have told us about the
government's massive efforts to stimulate the economy and
lead us out of the doldrums. Like many of you, I have some
suspicions about how well or how quickly this plan will
work. But I don't have any doubt that the $13 trillion
Washington has spent, lent or committed to the bailout is
going to find its way into the pockets of investors.
You've read a lot of news accounts of what's happening
with the bailout, but you likely aren't reading anything
about how you can benefit.
That's a shame, because the biggest financial story of
our lifetimes is playing out right before our eyes. Every
time one of those public dollars spent, a private profit is
being realized. If you'd like to learn how to make sure you
get your fair share, I'd like to show you how. Bristol's a
great stock with a great dividend. The SEC is a great
resource that's underused. But we're just scratching the
surface.
Click here for the full story.
-- Andy Obermueller
Co-Editor
Global Dividend Opportunities
GlobalDividends.com
839-K Quince Orchard Blvd.
Gaithersburg, MD 20878-1614
P.S.
-- Don't miss a single issue! Add our address,
Research@GlobalDividend.com,
to your Address Book or Safe List. For instructions,
go
here.
|
Printer-Friendly
