InvestMacro FX

By DividendOpportunities.com

As income investors, we can get caught up in yields… almost to a fault. But there is something else you should be studying that could make just as big a difference to your long-term returns: dividend growth.

That’s because dividend growth can make even lower-yielding stocks into big income producers over time. Take a look below at the income streams from a stock yielding 7% but not growing dividends, versus a 5% yielder that hikes payments an average of 10% a year over seven years. If you held 1,000 shares trading at a $10 share price, here is the income stream each would produce over a year:

In just five years, that 5% yield would actually be worth more than the 7% yield. And just two years later, your income stream would grow to be 27% more than the stock yielding 7%. Keep in mind, this doesn’t take into account rising share prices. If both yields stayed the same, the share price of the 5% yielder would have to grow to $17.72 — a 77% gain.

Buying stocks that increase dividends allows you to take advantage of one of the most powerful tools in the investors’ arsenal — the wealth-building effect of compounding. And consistent dividend growth is like jet fuel for the compounding engine.

But there are more advantages to companies able to consistently grow dividend payments. One often overlooked “plus” is that they tend to be safer investments. Dividends are a litmus test of a company’s true financial strength. Only companies able to grow earnings through good times and bad will commit to consistently raising dividends. And these are the types of business that tend to see more stability in their shares.

The best measure of their value is how dividend growers perform over time. And the best proof lies in a special index created by Standard & Poor’s, called the “Dividend Aristocrats.” Every company on this list must have posted increased dividends in each of the past 25 years.

According to S&P data, the Dividend Aristocrats have consistently outperformed the broader S&P 500. The Dividend Aristocrats fell only -22% during the 2008 market crash, much less than the -37% decline for the S&P 500. Moreover, the group rebounded 27% the following year, slightly better than the 26% gain on the S&P 500.

As you would guess, the ranks of the Dividend Aristocrats are exclusive — only 42 of the 500 companies in the S&P made the list this year (about 8% of the index). To hone in on the top contenders for my Dividend Opportunities readers, I used this list of 42 companies as my starting point and then looked at the eight companies that tend to raise payments the fastest:

Pitney Bowes (NYSE: PBI)  | Yield: 7.6%
Pitney Bowes yields 7.6% and has recorded 29 consecutive years of dividend growth. Its business is boring — it makes postage meters and mail processing equipment, but its dividend growth is anything but. Dividends have grown an average of 10% a year since Pitney Bowes began paying investors in 1982. The 2011 increase of about 1.4% was below average, but it did raise the annual payment to $1.48 per share.

Cincinnati Financial Corp (Nasdaq: CINF) | Yield: 6.1%
The only financial company that made this list is property/casualty insurance provider, Cincinnati Financial. This company has raised dividends 50 years in a row — a wonderful half-century of increasing payments. Dividend increases of late have slowed in line with the overall economic outlook, but consider that in 1999 the company paid just about $0.60 a share, compared to today’s $1.60 annual rate.

Leggett & Platt (NYSE: LEG) | Yield: 5.4%
Fixture and furniture manufacturer Leggett & Platt saw a rebound in its markets and signaled confidence in its future prospects in August 2010 by hiking the dividend 4% to a $1.08 per share annual rate. Last month, the company reaffirmed its stance by raising the dividend again to $1.12. The company boasts an impressive track record of 40 years of dividend growth.

Johnson & Johnson (NYSE: JNJ) | Yield: 3.6%
Johnson & Johnson’s 3.6% yield isn’t likely to “wow” you — but remember the example above when it comes to growing dividend payments. The company has increased dividends 49 years in a row. The last increase, announced in April, boosted the dividend by 6% to a $2.28 annual rate.

Abbott Labs (NYSE: ABT) | Yield: 3.7%
Drug manufacturer Abbott Labs has grown dividends for 39 years running. Like Johnson & Johnson, it’s another medical company that doesn’t pay a high “headline” yield, but it can grow payments. In the past decade, dividend growth has averaged nearly 9% a year. The last hike, in April, was a 9% increase. Abbot now pays a $1.92 annual dividend per share, up from just $0.74 in 2000.

Automatic Data Processing (Nasdaq: ADP) | Yield: 3.0%
Automatic Data Processing provides payroll processing services to thousands of businesses nationwide. Even with unemployment now at a high, this company has been able to hike dividends every year for 36 years straight. The last increase raised the payment by 6% to a $1.44 annual rate. In the past decade, annual dividend growth has averaged an impressive 12%.

McGraw-Hill (NYSE: MHP) | Yield: 2.4%
You might not know it, but McGraw-Hill actually owns Standard & Poor’s, so it is only fitting this company makes S&P’s Dividend Aristocrats list. McGraw-Hill’s ranking comes thanks to 38 straight years of dividend growth. In the last decade, dividends have grown an average 8% a year. The last dividend hike, in February, lifted the annual rate to $1.00 per share.

PPG Industries (NYSE: PPG) | Yield: 3.1%
PPG Industries is a relatively new member to the list, with “only” 26 years of dividend increases — but it has paid 452 consecutive dividends. This maker of sealants and window coatings last raised dividends in May by two pennies per quarter to a $2.28 annual rate.

Before investing in any of the ideas above, I would want to examine each in more detail, considering factors like business outlook and financial strength. Still, the combination of dividend increases and a solid yield makes this list an interesting starting point for further research.

Good Investing!

Carla Pasternak’s Dividend Opportunities

Disclosure: StreetAuthority owns shares of ABT as part of the company’s various “real money” portfolios. In accordance with company policies, StreetAuthority always provides readers with at least 48 hours advance notice before buying or selling any securities in any “real money” portfolio.

Three Beat Up Oil and Gas Plays Set to Outperform the Market

by David Fessler, Investment U Senior Analyst
Tuesday, October 11, 2011: Issue #1618

When analysts pronounced commodities “overbought,” investors headed for the exits, selling indiscriminately. That’s always a setup for bargain hunters.

I have three energy stocks that are way oversold, and are ripe for participation in a snapback rally. In addition, oil prices have now halted their slide, and seem to be heading back north.

Let’s take a look at a few companies that could benefit from another about-face in oil prices…

Independent Oil Exploration and Production

The first company is Premier Oil PLC, (LSE: PMO.L). Based in London, England, Premier Oil is an independent oil exploration and production company. It’s divided up into three operating units: the North Sea, Asia and the Middle East/Pakistan.

The company’s total reserve and resource base is estimated to be about 488 million barrels of oil equivalent (MMboe). The company estimates it can add as much as 200 MMboe in its three core operating regions.

It plans to make value-adding acquisitions in the nine countries in which it operates. It recently agreed to purchase EnCore Oil, a deal that will significantly expand its presence in the North Sea.

A World Leader in Natural Gas Production

BG Group, (LSE: BG.L), is primarily engaged in the production of natural gas. Also based in the United Kingdom, BG Group has three segments: exploration and production (E&P), liquefied natural gas (LNG), and transmission and distribution (T&D).

The company recently acquired an interest in three offshore blocks off the coast of southern Tanzania. It operates in a total of 13 countries. With a market cap of nearly $69 billion, BG is one of the world’s leading producers of natural gas.

The company recently signed a long-term LNG sales agreement with India. In the last four years, the company has doubled its proven gas reserves, which now stand at just over 16 billion barrels of oil equivalent (Bboe).

Its largest production area is offshore Egypt, where in 2010 it produced 54.1 MMboe. BG is responsible for 35 percent of all the gas produced in Egypt.

Shares are currently trading about 30 percent off their 52-week high, but are rebounding along with the rising price of oil and natural gas.

Since most of its natural gas is sold internationally, the low prices in the United States have no material effect on its ability to sell gas at a handsome profit.

Investors wanting exposure to a growing natural gas company with primarily international customers should consider adding BG to their portfolio.

An Oil Discovery Machine Firing on All Cylinders

The last company I’ll mention isn’t oversold as much as the first two. It’s an oil discovery machine, and lately it’s been firing on all cylinders.

Tullow Oil, (LSE: TLW.L), continues to announce discoveries that just add to its value, and its shares have been responding in kind. Its American traded ADR shares are up just over two percent for the last year, but 16 percent off their 52-week high of $12.35.

With a market capitalization of $18.72 billion, Tullow is an independent oil and gas company with 53 licenses in 15 countries. Its four geographic markets include South America, South Asia, Europe and Africa.

Africa is by far its most active area, and it’s the leading independent oil producer in the region. Tullow is named after the small town near Dublin, Ireland where its Founder and CEO, Aidan Heavey, is from.

Heavey knew nothing about the oil and gas business, but on a tip from a friend, jumped in. He concentrated on small fields in Africa at first, and gradually built the company into one of the largest independent oil and natural gas producers in the world, and the largest in Africa.

In the last four years, he’s nearly tripled the company’s proven reserves to 1.4 billion barrels of oil equivalent. Over the last decade, its London-traded shares have soared 1,530 percent, making it one of the greatest investments in the oil and gas sector over that time period.

It has two major projects currently underway in Uganda and Ghana. Both promise future upside for Tullow shareholders, as additional reserves are added.

Investors wanting exposure to the African oil sector will be hard pressed to find a better play than Tullow Oil.

Good investing,

David Fessler

Article by Investment U

Oct. 11 (Bloomberg) — Naomi Fink, head of Japan strategy at Jefferies Japan Ltd., talks about the effect of fiscal stimulus on Japan’s economy. She speaks from Tokyo with Linzie Janis on Bloomberg Television’s “Countdown.” (Source: Bloomberg)

London Gold Market Report
from Ben Traynor
BullionVault
Tuesday 11 October, 08:30 EDT

THE SPOT MARKET gold price fell to $1655 an ounce Tuesday morning in London – a gain of 1% for the week so far – while stocks and commodities were mostly flat ahead of a Slovakian parliament vote that could potentially jeopardize efforts to tackle the Eurozone debt crisis.

Earlier on Tuesday the gold price hit its highest level in over a fortnight at $1685.

“The [gold] market is starting to show some price sensitivity around the current level,” said one Hong Kong bullion dealer during Asian trading.

“Volumes remain light with little conviction evident in the precious metals markets,” agrees Marc Ground, commodities strategist at Standard Bank.

“We don’t expect a strong push higher today…[but] strong support around $1650 from physical buying is still very much in place, which should protect gold from significant downside.”

The Hong Kong dealer reports sales of contracts for ‘four nines’ gold – which is 99.99% pure – came close to hitting a new record on the Shanghai Gold Exchange yesterday, as traders returned from China’s National Day Golden Week last week.

“This super strong post Golden Week sales figure implies a very upbeat Q4 2011 and Q1 2012 physical market,” he says, adding that peak sales volumes are normally hit around January or February.

Silver prices meantime fell to $31.42 – down from $32.54, but still a 0.8% gain on the week.

Following a four-day rally, European stock markets traded sideways Tuesday morning – with the FTSE showing a 0.7% loss and Germany’s DAX down 0.2% – as investors awaited a parliamentary vote that could derail Eurozone rescue plans.

Slovakia’s parliament is due to vote today on whether or not to ratify the European Union agreement of July 21, which includes increasing the scope of the European Financial Stability Facility – the Eurozone’s €440 billion ad hoc bailout vehicle set up last year.

The Freedom and Solidarity Party (SaS), which is one of the four members of the ruling coalition, has said Slovakia should reject the creation of the European Stability Mechanism – the permanent bailout fund due to replace the EFSF in 2013 – and has made this a condition of its agreeing to approve the July 21 agreement. SaS also wants Slovakia’s participation in any EFSF rescues to be restricted.

“We are going to support countries like Italy via bond buys,” says SaS leader Richard Sulik.

“We will be saving French banks holding billions in assets,” he adds, pointing out that Slovakia is one of the smallest economies in the Eurozone.

Slovakia is the only Eurozone member yet to ratify the agreement, following Malta’s approval on Monday.

“A rejection of the measures [by Slovakia] would probably result in a second vote being called almost immediately,” says a note from Mitsui Precious Metals this morning.

“[However it] could jolt the markets and erode some of the confidence that has accumulated over the past few days.”

“I don’t think [the vote] is going to be a dealbreaker,” adds James Buckley, fund manager at Baring Asset Management in London.

Elsewhere in Europe, leaders have postponed by one week a crisis summit that was due begin next Monday.

“Further elements are needed to address the situation in Greece, the bank recapitalization and the enhanced efficiency of stabilization tools,” explained European Council president Herman van Rompuy yesterday.

“This timing will allow us to finalize our comprehensive strategy on the Euro area sovereign debt crisis.”

Germany has led calls for private sector creditors, including banks, to take greater losses on their Greek debt holdings than the 21% agreed on July 21. Jean-Claude Juncker, who chairs the Eurogroup of single currency finance ministers, said this week that banks’ losses on Greek debt could be more than 60%.

The European Central Bank has said it is opposed the imposition of private sector losses.

“The high interconnectedness in the [European Union] financial system has led to a rapidly rising risk of significant contagion,” ECB president Jean-Claude Trichet told the European Parliament Tuesday, in his last appearance before he steps down at the end of this month.

“Sovereign stress has moved from smaller economies to some of the larger countries. The crisis is systemic…it threatens financial stability in the EU as a whole and adversely impacts the real economy in Europe and beyond.”

Hedge fund investor John Paulson meantime saw his gold investment fund lose 16.4% of its value in September – compared to a fall of just 11% in the gold price– according to the Wall Street Journal, which cites “people familiar with the situation”.

Since the start of 2011, the WSJ reports, Paulson’s gold fund – which likely contains gold mining stocks as well as exposure to the metal itself – is up 1%, compared to a gold price gain of 16%.

Ben Traynor
BullionVault

Gold value calculator   |   Buy gold online at live prices

Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.

(c) BullionVault 2011

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Oct. 11 (Bloomberg) — Puru Saxena, chief executive officer of Puru Saxena Wealth Management, talks about the economies of the U.S. and China, the outlook for the European debt crisis and his investment strategy. Saxena speaks with Susan Li, Zeb Eckert, Rishaad Salamat and John Dawson on Bloomberg Television’s “Asia Edge.” (Source: Bloomberg)

Video courtesy of ForexCT – A leading Australian forex broker, liscensed by the Australian Securities & Investments Commission, offers the MetaTrader4 and PROfit Platform to retail traders. Other services include Segregated Accounts, Trading workshops, Tutorials, and Commodities trading.

Video courtesy of ForexCT – A leading Australian forex broker, liscensed by the Australian Securities & Investments Commission, offers the MetaTrader4 and PROfit Platform to retail traders. Other services include Segregated Accounts, Trading workshops, Tutorials, and Commodities trading.

By ForexYard

Data on the Canadian housing sector today may indicate mild optimism that could drive the value of the Canadian dollar (CAD) higher in the short-term. Recent news has done little to alter the current direction of the forex market, though news could hold values steady should they come in near forecasts.

Economic News

USD – US Dollar Stabilizes as Markets Come Off Holiday Break

The US dollar (USD) was seen trading mildly bullish early Tuesday morning as investors seemed somewhat less pessimistic about growth in Europe and Asia, but still uncertain due to an assumed temporary state of things at present. Sentiment does not seem to be as stable as many economists would like, though, as investment does seem to be shifting eastward away from the US.

Data on the North American housing sector today may indicate mild optimism that could drive the greenback lower in the short-term. Recent news has done little to alter the current direction of the forex market, though news could hold values steady should they come in near forecasts. Housing Starts in Canada are forecast to hold steady this week, which could have the effect of lifting the value of riskier assets, though this will need further data to be confirmed.

As for today, there will be only one US economic release, with most news focused on other economies. Liquidity will likely be higher in today’s early trading as these data points are published, though the impact of Britain’s Manufacturing Production reading may not be enough to force a surge in any direction on USD pairs and crosses. Housing and consumer confidence are in focus this week and traders will want to pay attention to the latter in the case of mounting pessimism and its affect on dollar values.

EUR – EUR Trading Flat as Trichet Prepares Speech

The euro (EUR) is expected to be seen trading with mildly bullish results this week ahead of a slew of reports on the region’s consumer confidence and manufacturing sector. Against the US dollar (USD) the euro has been trending upwards from a recent flight to higher yields after the weekend’s optimistic jobs reports. Today’s speech by ECB President Jean-Claude Trichet could offer more insight into what is happening across the euro zone.

Traders are looking for a way to balance a renewal of risk aversion with continued shakiness in global markets. A mildly pessimistic sentiment towards investing in global stocks at the moment has many investors on edge and looking for safety. An embattled euro zone, fending off market bears amid turmoil in its peripheral nations, also looks to be losing ground in financial markets as safe haven assets make long strides.

Sentiment across the euro zone has turned slightly more positive, with many analysts and economists expecting moves towards higher yielding assets by traders this week. Great Britain, moreover, appears positioned for a relatively better quarter than its southerly neighbors. With several minor reports expected all week, most expecting bullish figures, the GBP is in a position to continue its recent streak, though the same cannot be said for the EUR.

JPY – Japanese Yen Consolidating as Traders Weight Global Sentiment

The Japanese yen (JPY) was seen trading mildly lower versus most other currencies this morning as its value as an international safe haven was being challenged by an air of impending intervention by the Bank of Japan (BOJ). Being linked to international risk sentiment, the yen has experienced an expected uptick during a period when shifts away higher yielding assets became prominent. The JPY has been experiencing several long strides lately from the various shifts into riskier assets.

The latest moves of the yen are causing some concerns, however, as many speculators are anticipating another round of intervention by the BOJ. With industrial production data out this week, traders are waiting to see what the BOJ will do in the face of a downturn. A strengthening yen has benefits for the buying power of the island economy, though its dependence on exports makes a strong yen unfavorable for longer-term growth in Japan’s current financial model. As the island currency remains bullish, the pressure begins to mount for the expected bank move to lower its currency strength.

Oil – Oil Prices Holding Steady amid Market Turmoil

Crude Oil prices held steady Monday as sentiment appeared to favor a mild downtick in global stocks following policies of monetary stagnation being executed by several central banks last week. Data releases out of Europe and the US are still driving many investors back into safe-haven assets as many reports suggested a surprise downtick in growth among global industrial output and consumer spending.

An expected jump in dollar values due to this week’s risk sensitive environment has helped many investors ram up their short-taking positions on physical assets, but with the USD’s gains leveling off this morning, sentiment appears to have the price of crude oil holding steady near $90 a barrel. Should Crude Oil sentiment continue to flatten this week, oil prices may reach a decision point which forces a wide swing by mid-week.

Technical News

EUR/USD

The EUR/USD cross has experienced a bullish trend for the past few days. However, it seems that this trend may be coming to an end. The RSI of the 8-hour chart shows the pair floating in the over-bought territory, indicating that a downward correction will happen anytime soon. Going short with tight stops might be a wise choice.

GBP/USD

The cross has experienced much bearishness yesterday, and currently stands at the 1.5630 level. There is much evidence in the chart’s oscillators that supports a possible bearish correction today. This is supported by the 8-hour chart’s Slow Stochastic. Going short with tight stops may turn out to bring big profits today.

USD/JPY

The pair has been range-trading for a while now, with no specific direction. The Daily chart’s Slow Stochastic providing us with mixed signals. The 4 hour charts do not provide a clear direction as well. Waiting for a clearer sign on the hourlies chart might be a good strategy today.

USD/CHF

The cross has been dropping for the past two days now, as it now stands at the 0.9040 level. The Slow Stochastic of the 4- hour chart shows a bullish cross has recently formed, indicating that an upward correction is imminent. This view is also supported by the RSI of the 2-hour chart. Going long with tight stops may turn out to be the right choice today.

The Wild Card

Crude Oil

Crude oil prices rose significantly yesterday and peaked at $ 86.06 for a barrel. However, the 8-hour chart’s RSI is floating in an overbought territory suggesting that a recent upwards trend is loosing steam and a bearish correction is impending. This might be a good opportunity for forex traders to enter the trend at a very early stage.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

Indonesia’s central bank, Bank Indonesia, dropped the BI reference rate 25 basis points to 6.50% from 6.75%.  Bank Indonesia Governor, Darmin Nasution, said: “We are bringing the policy rate to a level that is more reasonable,” further noting “we saw the 6.75 percent rate as too high, unless we estimated inflation next year to be very high.”  Nasution also noted the impact of global conditions; “The global crisis has not hit our real sector except for the financial market,” and pointed out that “Private consumption and investment remain the driver in economic growth.”

At its September meeting, the Bank held the key monetary policy rate (the BI Rate) unchanged at 6.75%.  Previously the Bank raised the BI rate by 25 basis points to the current 6.75% in February 2011.  Indonesia reported annual inflation of 4.61% in September, compared o 4.79% in August and July, 4.61% in June, 5.98% in May, 6.16% in April, and 6.65% in March, and just inside the inflation target of 5% +/-1% in 2011 (which changes to 4.5% +/-1% in 2012).  

Nasution said the Bank expects “inflation next year will be below 5%”.  Bank Indonesia has previously forecast GDP growth of 6.3-6.8% in 2011 and 6.4-6.9% in 2012 for the Indonesian economy, meanwhile Indonesia reported annual GDP growth of 6.5% in the June quarter this year.  

The Indonesian Rupiah (IDR) has gained about 1% against the US dollar so far this year, and the USDIDR exchange rate last traded around 8,995.

By MoneyMorning.com.au

Unless you’ve been living under a rock, you would have heard Apple Inc., [NASDAQ: AAPL] co-founder, Steve Jobs died on 5 October.

Your editor was living under a rock… well, a self-imposed news blackout anyway. So we didn’t read about it until four days later.

We’re not going to write a eulogy or obituary praising the man. That’s not our style. Besides, we never met him. And we never knew him. So we’ve no idea what he was like. Instead, we’ll focus on what we do know…

Entrepreneurialism.

In today’s Money Morning we’ll try to explain what are and aren’t entrepreneurial companies. And most importantly, why this is must-know information for investors.

Bottom line: if you’re a growth investor, finding innovative growth opportunities early on can be the best way to maximise gains on the stock market.

It can mean the difference between a steady and dependable gain of 5 or 10% per year in a non-innovative (or what we like to call, “copy-cat”) company… or potentially making 100%, 200% or 500% from genuine game-changing innovators.

But before we go on…

To be honest, different people have different ideas about it.

But here’s our definition: it’s about creative destruction or disruptive technologies. It’s about improving on an idea… replacing an old technology… or even just giving a technology, product or service a nudge and taking it in a new direction.

For instance, Apple is an innovative and entrepreneurial company. Steve Jobs was an innovator and entrepreneur.

By contrast, another well-known technology firm, Hewlett Packard [NYSE: HPQ] is a copy-cat company. It no longer innovates.

Now, don’t get us wrong. There’s nothing wrong with copying ideas. And there’s nothing wrong with copying an idea and offering it for a cheaper price.

In fact, for you as a consumer it’s great.

But for you as an investor it’s not so great.

Investing in copy-cat companies is usually a low-risk and low-return affair. Why?

Because unless the new firm is able to add value to the product and service, it’s unlikely it will be able to charge more for its product. In fact, it’s more likely the copy-cat firm will have to undercut the firm it’s copying in order to win customers.

Generally (but not always) this means a race to the bottom for revenues and profits… especially if the barriers to entry are low.

A good recent example is tablet computing…

Apple was the first to market. And because it had built a strong brand with its iPod and iPhone, it could charge high prices for a genuinely innovative product.

Firms that just tried to copy Apple by releasing a tablet computer have met with mixed success. Mainly because they didn’t have a “sticky” brand… they had spent years commoditising their products and training customers to buy on price (we’re thinking of the PC and mobile phone companies).

A classic example is Hewlett-Packard’s (HP) TouchPad disaster. After poor sales it withdrew the product. But because it had already made a bunch of the things it sold them off for a cut-price $199… a 60% discount to the original retail price.

Not surprisingly, at $199 the product sold out in hours… because that’s the price consumers would pay for a commoditised product.

Whereas consumers who buy for the brand and perceived quality are happy (or foolish) to pay three-times that amount for Apple’s iPad product.

The difference shows through clearly in the revenue and profit numbers for Apple and HP. For the last financial year HP made sales of USD$126 billion and net income (profit) of USD$8.7 billion.

That’s pretty good. But now look at Apple…

It made half the sales of HP – just USD$65 billion. Yet its profit was 60% higher than HP’s at USD$14 billion.

OK. The companies are different. It’s not a direct comparison. But it’s a good comparison between the returns you can expect from investing in an innovative and entrepreneurial firm like Apple… and the returns you can expect from a copy-cat firm like HP.

To show you even more clearly, check out the chart below:

Click here to enlarge

Apple (blue line) shares are up 400% in five years… HP (red line) shares have halved!

Of course, it wasn’t always that way. In the early days HP was innovative too. But that’s long in the past. Today it’s just one of many computer companies scratching around for profits in a low margin business.

And maybe one day Apple will be a copy-cat firm like HP. Who can tell?

In short, the message is this: when you’re investing for growth you should avoid the copy-cats. Copy-cat investing is fine for a steady and dependable income stream. But it’s not for growth investors.

To get big triple-digit gains to boost your portfolio performance, you should always look for the innovating firm. Of course, these firms are riskier. And the punt won’t always pay off. But if it does the rewards can be huge.

That’s why, in our view, if you’re happy to take a risk, punting on innovators and entrepreneurs is a risk well worth taking. Who knows where or when the next Apple will emerge…

But that shouldn’t stop you from looking for it.

Cheers.
Kris.

PS. If you’d like more details on how I pick innovating stocks from the crowd, click here to view this free presentation.

Ditch the Copy-Cats and Back the Innovators