Southwest Airlines is Very Attractive Right Now

Southwest Airlines (LUV), down 24% this year, more than any airline. Their stock price has recently dropped due to a 50% jump in oil prices, as well as having their first death on a plane since 2009. This recent incident has caused fewer passengers, but largely because the company has slowed advertising after the accident. United Continental announced aggressive expansion plans early in the year that caused investors to worry that competition is ramping up.
Now with the buying opportunity. Their stock price is very low so it's very attractive to investors, and their low price has been knocked down only on temporary issues. A Cowen analyst said that Southwest "deserves a multiple of 15 times, would lift shares to $63 from a recent $50."
For the future, fare wars with competitor airlines pinch airline profits. US air travel was up 5.3% in April, so the industry must match capacity with demand. On the upside, Southwest hedges its fuel costs, which is protecting themselves from $80 oil prices, and is the only airline that does this. Southwest historically pays larger tax bills than rivals, therefore the company can take advantage of the new corporate tax rate of 20% with them being the largest airline that only operates in the U.S. With this extra money saved from corporate taxes, Southwest is either going to buyback stock or invest their money in a new fleet, which is needed. Let's hope that they go with buying back stock, but buying a new fleet won't mean a drop in the stock price, instead it will cause the price to steadily increase instead of almost instantly when buying back stock.

Emerging Markets are Wobbling

As the U.S. raises interest rates and strengthens the dollar, emerging markets will be tested. This also comes at a time where there're rising oil prices as well as the start of trade wars. Considering Brazil’s stock market has recently fallen 5%, Tech took the biggest hit, because investors own stock in Tech, and trade the rest. Therefore, when the rest of the industries fall, investors will be forced to raise cash, Tech could be hit hard. For right now we're worried about the “1998 risk”, when emerging market problems continue to grow and force investors in the US to take defensive action. Higher interest rates make emerging market less attractive and lead investors to cash in their overseas holdings. Foreign investors have pulled out an around $12 billion in emerging markets in may. Other factors that could hurt emerging markets include the French President threatening to make the G-7 the G-6, Mexico could place $3 billion in tariffs on US Goods after Trump imposed tariffs on aluminum and steel, as well as the uncertainty of the Euro Zone. As the FED continues to tighten monetary policy, it's bad for emerging markets. Overall, emerging markets are not something you should touch right now, but you should really pay attention to their movements, as it helps us understand why the U.S. economy is doing so well.

Quick and Easy Tips for New Investors

     The first step you should take before you start investing is to pay off as much debt as possible. Debt is a drag on your ability to save. Think of debt as a sack of potatoes that you have to carry over your back everywhere you go. By getting rid of the debt it takes that weight off your back which allows you to become lighter and move faster.
     Before you start putting your money in a stock, bond, or money market fund you should build your savings first. A major reason why some investors fail is because they don't have a lot of cash to begin with and they risk too much too soon. If you're uncomfortable with an investment then you should consider taking steps to remove your uncertainty. You may want to research further into the company and if you're still uncertain then you can always choose another investment class altogether. A good rule to follow is that if you don't understand it, you shouldn't invest in it.
     You want to separate your savings from your investments. Once you have enough money to start investing you should split your funds between a savings account and a mutual fund or money market account. You should have money in your savings so in case of emergencies you don't have to take money out of your investment account. One last tip for today is that you should build your investment capital by putting money in you money market mutual fund before you start to work with it.
         

First Step to Growth Dividend Investing

The reason why I have somewhere between 85% - 90% of my portfolio in dividend growth stocks is because of several factors.
1) Dividend growth investing is a simple strategy that is easy to understand by almost everyone.
Essentially I allocate my capital into businesses that send me a portion of their growing profits every quarter. I can then use those dividend checks any way I want to, and they cannot be taken away from me. My investments are working for me around the globe, 24 hours a day, 7 days a week, 365 days an year, finding new ways to increase revenues, profits and dividends. In the case of a company like PepsiCo (PEP), it literally means selling hundreds of snacks and beverage products around the world to hungry and thirsty consumers. I view the dividends I receive from those companies as purely passive income, for which I did not have to work an insane amount of time each week for. The cash is stable and growing, and makes budgeting in retirement a breeze, since I won’t have to rely on complicated mathematical formulas that traditional asset depletion strategies require. The investments are those large blue chip companies whose products I use on a repeated basis, and whose business I understand. As these companies earn more over time, they reward me with dividend raises, which have always been in excess of my salary raises. It is as if my household has an extra worker, silently earning income for me, and sharing all of it with me.