Out Fox The $treet

As riots erupted in Brazil over the last few weeks, the stocks trading on US exchanges have collapsed. In fact, the Brazil iShares Index (NYSEMKT: EWZ ) fell from around $54 to $40 over a few weeks during June. Even worse, the index peaked out around $75 back in early 2011. Over two years later and the index still remains in a downtrend as domestic stocks soar. Another major reason for more » Disclosure: No positions mentioned. Please review the disclaimer page for more details. 

After eight rate cuts totaling 450 basis points to a record low 8%, the Brazilian economy and stock market are still struggling to regain the growth of the last decade. Read this CNBC report for more details on the economy and interest rate cuts. Surely, now has to be the time to invest in this country. The Bovespa (BVSP) now trades close to 3 year lows, only trading slightly lower in the August to October 2011 time frame last year. So why aren't the rate cuts propping up the stock market? For one, the market doesn't appear as forward-looking anymore. The original rate cut didn't happen until August 2011, meaning that it is just now impacting the economy. Unfortunately, it hasn't prevented the forecast for the economy from dropping to 2.5% now. Until this trajectory returns to increased growth, stocks probably won't move up much. Read the full article at Seeking Alpha. Disclosure: Long NIHD. Please review the disclaimer page for more details.  ...

This model gained a solid 4.9% in February versus 4.1% for the benchmark S&P 500. As typical of this conservative model it tends to gain alongside the market on the way up and outperform during periods of weakness. Trades February was a slightly more active month for this model with 4 trades mainly switching out of two positions with reduced yields for two positions with attractive yields. Gilead Sciences (GILD) and Banco Itau (ITUB) were both sold during the month. Gilead Sciences is a leading biotech firm that greatly reduced their stock buyback program in order in purchase Pharmasset. This virtually eliminated the net payout yield as the company confirmed on the Q4’11 earnings call leading us to selling the stock as it surged on earnings. See blog post for more details. This was very fortunate for the model as either luck or the reduction of the buyback foretelling weakness ahead, the company announced disappointing drug information just a couple of...

This is the 2nd article in a series focusing on whether now is the time to invest in emerging markets. The first article which focused on India concluded that while some appealing stocks were at very discounted levels, investors need to wade into the stocks carefully, in order to not catch the proverbial falling knife. This article focuses on the largest Latin America economy, Brazil. It faces similar problems, where high inflation led to numerous interest rate increases by the central bank, leading to a slowing down of the economy. The major difference, though, is that Brazil has already been aggressive-- with three rate cuts of 50 basis points each-- while India is still pondering whether to cut rates. The country also has two potential catalysts, with the World Cup arriving in 2014 and the Summer Olympics in 2016. Both events will require large infrastructure spending that should benefit not only the economy, but a lot of the stocks traded in the U.S. Read the full article at...

October was an excellent month with a 9.41% gain for this model, but the relative performance was lacking with the benchmark up 10.77%. This was the reverse of the results during the summer swoon, but mostly inline with what would be expected in this large cap model. Stocks with market caps over $10B typically underperform when the market soars. Trades The model had three trades in October. FirstEnergy (FE) was sold as the stock saw decent gains during the summer months hence reducing the net payout yield below normal levels in the model. Typically the model looks to sell when a stock hits 52 weeks high and either buybacks tail off and/or the dividend yield slumps if the company doesn't raise the rate. The other sell was Microsoft (MSFT) since it has reduced buybacks over the year making the stock less attractive. Possibly this was due to the Skype purchase or other potential deals that could be in the pipeline. Regardless the yield dropped to an unappealing level for a cons...

September was another decent month for the Net Payout Yields model with a return vs. benchmark of 3.46% - the portfolio was down 3.72% while the S&P500 fell 7.18%. Naturally on an absolute basis the results are disappointing, but this model is not designed to time the markets. The goal remains to outperform on the way down and remain even on the way up, in the effort to produce superior returns over time. For 2011, the model remains roughly 7.0% higher than the benchmark. As of the end of September, year to date the model was down 2.92% while the S&P500 fell 10.04%. Trades The model was inactive for the second month during September as the weak market increased the yields and hence the valuation attractiveness of most of the equities in the model. A few stocks though have recently reached new 52 weeks highs causing the yields to decline. For example, Bristol-Myers Squibb (BMY) has seen the dividend yield drop to 4% and without a buyback the Net Payout Yield (NPY) has reac...