Sunday, September 23

Week 377 - Russell 1000 Non-financial Companies With High Sustainability and S&P Ratings

Situation: You’d like information about the durability of your investments. Sustainability is the jargon term that investment professionals have assigned to this topic. The problem is to quantify it by rating the 3 main components: Environment, Social, and Governance (ESG). The Yahoo Finance website now has a heading for sustainability that attempts to do exactly that. The editors of Barron’s also have a recent article looking more closely at the “100 Most Sustainable Companies”, with date suggesting that these may outperform the S&P 500 Index. We’d like to know which of those have also been examined by S&P. Specifically, which of those 100 Most Sustainable Companies have issued bonds that S&P has rated A or better?

Mission: Use our Standard Spreadsheet to analyze all of the Barron’s “100 Most Sustainable Companies” that are on the Russell 1000 List, selecting only the non-financial companies that have an S&P bond rating of A or better, and an S&P stock rating of B+/M or better. To identify stocks that are possibly overpriced, include columns for “Graham Numbers” and “7-Yr P/E”.

Execution: see Table.

Bottom Line: 18 companies meet criteria, 14 of which already appear on our two major lists: “The 2 and 8 Club” (see Week 360); “Blue Chips” (see Week 361). The new companies are Stanley Black & Decker (SWK), WW Grainger (GWW), Colgate-Palmolive (CL) and Deere (DE).

Risk Rating: 6 (where 10-Yr US Treasury Notes = 1, S&P 500 Index = 5, and gold bullion = 10)

Full Disclosure: I dollar-average into MSFT and PG, and also own shares of CSCO and CMI.

"The 2 and 8 Club" (CR) 2018 Invest Tune All rights reserved.

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Sunday, September 16

Week 376 - What Does A Simple IRA Look Like?

Situation: You’re bombarded with advice about how to save for retirement. But unless you’re already rich, the details are simple. Dollar-cost average 60% of your contribution into a stock index fund and 40% into a short or intermediate-term bond index fund. If you know you’ll never be in “the upper middle class”, opt for the short-term bond index fund. But maybe you have a workplace retirement plan, which makes saving for retirement a little more complicated. Either way, you’ll want to contribute the maximum amount each year to your IRA, which is currently $5500/yr until you reach age 50; then it’s $6500/yr.

Here’s our KISS (Keep It Simple, Stupid) suggestion: Make your IRA payments with Vanguard Group by using a Simple IRA (Vanguard terminology) composed only of the Vanguard High Dividend Yield Index ETF or VYM. Then, contribute 2/3rds of that amount into Inflation-protected US Savings Bonds. These are called ISBs and work just like an IRA. No tax is due from ISBs until you spend the money but there’s a penalty for spending the money early (you’ll lose one interest payment if you cash out before 5 years). The annual contribution limit is $10,000/yr. A convenient proxy for ISBs, with similar total returns, is the Vanguard Short-Term Bond Index ETF or BSV

Mission: Create a Table showing a 60% allocation to VYM and 40% allocation to BSV. Include appropriate benchmarks, to allow the reader to create her own variation on that theme.

Execution: see Table.

Bottom Line: However you juggle the numbers, it looks like you’ll make ~7%/yr overall through your IRA + ISB retirement plan, with no taxes due until you spend the money. In other words, each year’s contribution will double in value every 10 years. The beauty of this plan is that transaction costs are almost zero, and the chance that it will give you headaches is almost zero.

Risk Rating: 4 (where US Treasury Notes = 1, S&P 500 Index = 5, and gold bullion = 10)

Full Disclosure: I dollar-average into Inflation-protected Savings Bonds and the Dow Jones Industrial Average ETF (DIA).

"The 2 and 8 Club" (CR) 2017 Invest Tune All rights reserved.

Post questions and comments in the box below or send email to: