Hot Financial Stocks To Own Right Now

The stage is set for another year of solid stock market gains in 2014, with the extension of accommodative monetary policy providing ample liquidity and the solidification of US economic fundamentals supporting revenue and earnings growth.

As always there are unknowns that could and will provide multiple bumps along the road, and nowadays–amid what’s shaping up as an era remarkable for the level of influence politics exerts on market psychology–emanations from Washington, DC, will once again draw disproportionate coverage from major financial media.

Yet another tête-à-tête over the US debt ceiling in February and mid-term Congressional elections in November should provide ample opportunity for unbridled and unenlightening speculation, though we have the benefit of knowing ahead of time what may be in store.

In October 2013 Congressional Republicans in Congress agreed to raise the federal borrowing limit with no major policy strings attached as part of the deal to end the government shutdown. On Dec. 17, 2013, Republican Senate Minority Leader Mitch McConnell hinted it won’t be such a simple process the next time around.

Hot Financial Stocks To Own Right Now: Firstbank Corporation(FBMI)

Firstbank Corporation, through its subsidiaries, provides commercial banking products and services. It accepts checking, savings, and time deposits. The company also provides commercial, mortgage, agricultural, real estate, real estate mortgage, real estate construction, home improvement, automobile, and consumer loans. In addition, it offers trust, security brokerage, and title insurance services, as well as armored car services. The company operates 53 branch offices in central Michigan. Firstbank Corporation was founded in 1894 and is headquartered in Alma, Michigan.

Advisors' Opinion:

• [By Louis Navellier]

  A great example of these small banks with big potential is Firstbank Corp. (FBMI), a $155 million market-cap stock that operates 53 branch offices in central Michigan. Firstbank provides commercial banking products and services, including traditional deposit accounts and loans tailored to meet the needs of its business customers. FBMI also offers trust, security brokerage and title insurance services, and even armored car services. This bank stock has been rated an “A” all year, and the fundamentals just keep getting better. FBMI shares remain a “strong buy” at current prices.

Hot Financial Stocks To Own Right Now: Alleghany Corporation(Y)

Alleghany Corporation, through its subsidiaries, engages in the property and casualty, and surety insurance business in the United States. It underwrites specialty insurance coverages in the property, umbrella/excess, general liability, directors and officers liability, professional liability lines of business, and homeowners insurance. The company also writes surety products, such as commercial surety bonds and contract surety bonds. In addition, Alleghany Corporation owns and manages improved and unimproved commercial land, and residential lots in the Sacramento, California. As of December 31, 2010, the company owned approximately 320 acres of property in various land use categories. Further, it engages in the oil and gas exploration and production business. The company was founded in 1929 and is based in New York, New York.

Advisors' Opinion:

• [By Matthew Argersinger]

  Matching a stable of strong insurance businesses with intelligent investing is one of the key formulas Warren Buffett used to turn Berkshire Hathaway (NYSE: BRK-A  ) (NYSE: BRK-B  ) into one of the greatest investments of the past half-century. Fortunately for investors who weren't able to ride Buffett's market-crushing train, there are several smaller companies that have embraced Berkshire's formula with great success. One of those is Alleghany (NYSE: Y  ) , a multi-line insurance company whose objective�is "to create value through owning and managing operating subsidiaries and investments, anchored by a core position in property and casualty reinsurance and insurance." Sound familiar?

• [By Chris Hill]

  Which investors are worth following? In this installment of MarketFoolery, our analysts talk about why they're following Cook and Bynum's Richard Cook and Dowe Bynum, Martin Capital's Frank Martin, Alleghany's (NYSE: Y  ) CEO Weston Hicks, and T. Rowe Price's (NASDAQ: TROW  ) �Preston Athey.�

Hot Oil Stocks To Own For 2014: United Dominion Realty Trust Inc. (UDR)

UDR, Inc. is an independent real estate investment trust. The firm invests in the real estate markets of the United States. It owns, operates, acquires, renovates, develops, redevelops, and manages multifamily apartment communities. The firm was previously known as United Dominion Realty Trust, Inc. UDR, Inc. was founded in 1972 and is headquartered in Denver, Colorado with additional offices in Dallas, Texas; Houston, Texas; Newport Beach, California; Orlando, Florida; Phoenix, Arizona; Santa Clara, California; Tampa, Florida; and Washington DC, Virginia.

Advisors' Opinion:

• [By The Part-time Investor]

  The following stocks met the criteria in January of 2008 and were put into the initial portfolio:

  Abbot Labs (ABT)Advanced data processing (ADP)Associated Banc-Corp (ASBC)Bank of America (BAC)BB&T Corp. (BBT)Bemis Company (BMS)Anheuser Busch (BUD)The Chubb Corporation (CB)Clorox (CLX)Comerica Inc. (CMA)Diebold Inc. (DBD)Emerson Electronics (EMR)First Dollar Corp. (FDO)First Third BanCorp. (FITB)Gannett Co, Inc. (GCI)General Electric (GE)Hershey (HSY)Illinois Tools Works (ITW)Johnson and Johnson (JNJ)Leggett and Platt (LEG)Eli Lilly (LLY)La-Z-Boy (LZB)McDonald's (MCD)Marsh and Ilsley (MI)M&T Bancorp (MTB)PepsiCo (PEP)Pfizer (PFE)Procter & Gamble (PG)Pentair Ltd. (PNR)Regions Financial Corp. (RF)Rohm and Haas (ROH)RPM International (RPM)Sherwin Williams (SHW)Sysco Corp. (SYY)UDR Inc. (UDR)

  Historical quotes were taken from Yahoo Finance. $10,000 was put into each position, to the nearest whole share, so a total of $349,262.89 was invested. From 1/15/08 through 5/16/13 all dividends were reinvested back into the stock that paid them. If a dividend cut was announced, that stock was sold on the ex-div date of the new, lower dividend.

• [By Sean Williams]

  Everything's peachy for residential REITs!
  However, what terrible news exists for homebuilders could turn into fantastic news for the residential-REIT sector. You see, if lending rates begin to rise because the Fed is paring back its bond purchases, then it will remove the consumer incentive to purchase a home and will drive people back into renting -- which is great news for the big three residential REITS: Equity Residential, AvalonBay Communities (NYSE: AVB  ) , and UDR (NYSE: UDR  ) .

• [By Sean Williams]

  Take UDR (NYSE: UDR  ) or Equity Residential (NYSE: EQR  ) as perfect examples. Both have successfully been adding new communities and making FFO-accretive acquisitions in order to expand their rental portfolios. But, UDR and Equity Residential now boast debt-to-equity ratios in excess of 110%, with UDR carrying $3.5 billion in net debt and Equity Residential lugging around close to $11.6 billion in net debt. Although this debt has been refinanced or taken out in many cases as historically low lending levels, higher rates could stall community expansion for this sector and hurt bottom-line profits because of interest payments.

Hot Financial Stocks To Own Right Now: Timberland Bancorp Inc.(TSBK)

Timberland Bancorp, Inc. operates as the bank holding company for Timberland Bank that provides various banking services in Washington. The company offers various deposit products, including money market deposit accounts, checking accounts, regular savings accounts, and certificates of deposit. It also provides mortgage loans comprising one-to-four family residential, multi-family real estate, commercial real estate, land, and construction loans. In addition, the company offers non-mortgage loans, such as commercial business loans; and consumer loans consisting of home equity lines of credit, second mortgage, savings account, automobile, boat, motorcycle, recreational vehicle, and unsecured loans. It serves businesses and individuals primarily in Grays Harbor, Pierce, Thurston, Kitsap, King, and Lewis counties of Washington. As of September 30, 2011, the company operated 22 branches and 23 ATMs. Timberland Bancorp, Inc. was founded in 1915 and is based in Hoquiam, Washingt on.

Hot Financial Stocks To Own Right Now: Pimco High Income Fund(PHK)

PIMCO High Income Fund is a closed ended fixed income mutual fund launched and managed by Allianz Global Investors Fund Management LLC. The fund is co-managed by Pacific Investment Management Company LLC. It invests in the public fixed income markets across the globe. The fund invests in U.S. dollar denominated high-yield corporate debt obligations. It employs fundamental analysis along with a top down stock picking approach to make its investments. PIMCO High Income Fund was formed on April 30, 2003 and is domiciled in the United States.

Advisors' Opinion:

• [By Dan Caplinger]

  Lesson 1: Income is king.
  A look at the four funds trading at the highest premiums to net asset value reveals a common thread: They're all focused on maximizing income. What's interesting, though, is that they use different methods to reach the same ends. Among the three PIMCO funds, PIMCO High Income (NYSE: PHK  ) looks largely to the high-yield bond market for its holdings, while PIMCO Corporate & Income Opportunities (NYSE: PTY  ) has a somewhat lower distribution rate but has a sizable allocation to investment-grade debt. The fund with the highest premium, PIMCO Global StocksPLUS, uses futures contracts to add stock exposure to its portfolio of income-producing bonds. Finally, BlackRock Virginia Municipal Bond rounds out the top four with its tax-free bond portfolio.

• [By Morgan Housel]

  Interest rates have risen over the last month, offering a taste. Pimco High Income Fund (NYSE: PHK  ) is down 10% in the last month. The Vanguard Long Term Corporate Bond Fund (NASDAQ: VCLT  ) lost 4.6%. Mortgage REITS sensitive to the same interest rate risk have been pummeled; Annaly Capital Management (NYSE: NLY  ) shares are off by one-fifth over the last year.

• [By Dan Caplinger]

  But you can see in several places the consequences of the stampede toward high yield. Here are just a few:

  Closed-end funds Cornerstone Progressive (NYSEMKT: CFP  ) and Pimco High Income (NYSE: PHK  ) both make fixed payments back to fund shareholders on a monthly basis, and their distribution yields are truly extraordinary, at about 17% and 12%, respectively. Those dividends have enticed shareholders to pay $1.30 to $1.40 or more for each $1 of assets in the funds. Yet during most months, a substantial portion of those distribution payments has simply been a return of investor capital rather than true income from the funds' investments. A recent study discussed in The Wall Street Journal found that returns on a portfolio with a combined value and dividend-income strategy outperformed a strategy focused more exclusively on maximizing dividends by an average of 1.7 percentage points per year, a huge edge in long-run returns. In the dividend ETF arena, most funds tend to focus on maximizing yield. Although the popular Vanguard Dividend Appreciation (NYSEMKT: VIG  ) ETF bucks the trend by screening first for consistent dividend growth and only then looking at yield as a factor, many rival ETFs start with high-yielding stocks as their baseline and only then consider other desirable traits. Others focus solely on high-dividend niches of the market, such as iShares FTSE NAREIT Mortgage-Plus (NYSEMKT: REM  ) and its concentration on high-yield mortgage REITs.

  When dividend stocks get too popular, their prices get out of line with both their dividend income and the fundamentals of the businesses that underlie those stocks. In simpler terms, when dividend stocks become bad values, it's time to consider looking elsewhere for a margin of safety.