Wednesday, January 21, 2009



Confirmed Downtrend

Evidence exists for near term rally. For example, bull/bear sentiment ratios remain around 5 year lows. By itself this is very bullish, since it with so many investors so negative there are oceans of cash on the sidelines waiting to be deployed and fuel a market rise. This is why we’ve seen some violent upside moves on high volume since October. But their repeated failure to sustain upward movement, making lower highs and lower lows, confirms the downtrend

There are many great bargains out there. Thus we do continue to add stocks, but only with funds that will not be needed for the next 3-5 years, and even then only when these counter-trend rallies fail and establish a support level.


To start off with a bang, I present a stock that every income investor should at least get to know.

Enterprise Products Partners (NYSE: EPD): Buy under $19.56, Strong Buy under $17.56.

A classic example of the kind of stock we favor. Strong fundamentals that can support a growing dividend, currently yielding over 10% in one of the worst markets ever.

Enterprise Products Partners (NYSE: EPD): The short version: Since October the company has raised its quarterly dividend 1.55% from $0.515 to $0.523, received two additional senior unsecured credit lines totaling $593 million, and sold almost $83 million of common units.

EPD’s ability to obtain funding when most cannot, raise dividends when so many companies are struggling to maintain them or cutting them highlights our belief that this pipeline operator, along with some of its peers, will cope better with the current conditions than other energy companies.

Indeed, these recent events suggest that its expansion plans will continue as planned, suggesting future revenue and dividend growth.

Its share price tends to move with the market, so further declines are likely within the next year. While its true value is higher, since October it has shown support around 19.50, so our current buy price is below $19.56. It has twice tested support around $17.50, so we set our strong buy at $17.56. I would certainly raise this buy point if the market’s health improved. Meanwhile, we only buy at near term bargains to preserve capital.

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