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After three years of down markets, it would seem we are definitely due for one in which stocks go up for a change. As so many other assets seem suspect now - money market funds pay only about .5% a year; ten-year government bonds offer yields of just 4±%; real estate's bubble may be about to burst; gold is speculative and already at its highest level in a decade or so; collectibles are usually better as a hobby than an investment - the biggest risk now may not be to purchase stocks but to have too little exposure to equities.
Short-term outcomes can almost never be consistently predicted for stocks or stock mutual funds. However, for the mid- and long-term, carefully selected equities would appear to have excellent prospects.
Cable/broadcasting/telecommunications and health care/pharmaceutical sectors have been especially beaten down and would seem to offer particularly good potential.
Our favorite assets in these respective areas are: Liberty Media (L) (recent price $10.24); and Vanguard Health Care Fund (VGHCX) (recent price $98.40 - minimum investment $25,000). VGHCX has performed quite well long-term, with a ten-year 18.7% compound annual record.
With concerns over company use of profits and a presidential push for relief from dividend double-taxation, high-yielding stocks may again be more attractive. We like three with above average yields: General Electric (GE) (recent price $25.03) (3.03% dividend); SBC Communications (SBC) (recent price $27.85) (3.88% dividend); and Washington Mutual (WM) (recent price $35.29) (3.17% dividend).
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