December 6, 2010

CAIM’s Holiday List 2010

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A Personal Note

Dear Susan,

        Recently, my son came home from school with some amazing pictures of Sikorsky helicopters. He was very impressed! His math teacher’s husband is an engineer at Sikorsky and visited Noah’s class to talk about his job. Noah thought it would be really cool to have a helicopter. As I started to roll my eyes, I quickly realized that we could make the most of this event. I suggested to Noah that we may not be able to get a helicopter, but we should buy some stock in the company that makes the helicopter, United Technologies (UTX).
        ‘Tis the season to begin thinking about what to get our kids for Christmas. And of all the gifts we normally give, how many actually have a permanent lifespan? Wouldn’t it be nice to be able to give our children, or our grandchildren, nieces and nephews something with a meaningful and permanent impact?

        This is where the idea of giving kids an investment as a gift comes in. Every year I add some money to my childrens’ portfolio and do the

best to talk about it when I can. At this young age they may not really understand it, but I know that by repeating it year after year it will finally sink in.

        There are a couple of immediate, compelling reasons to consider this idea. Stocks as gifts for kids help to:

–   Promote financial literacy

–   Establish future savings

        In our article below we offer more on CAIM’s stock selections for children.

Warm regards,

Catherine Maniscalco Avery



CAIM specializes in creating and managing
customized and fully diversified investment
portfolios for private investors.
203.966.2712 p
203.966.5697 f
www.caimllc.com

Warm regards,

CAIM’s Holiday List 2010



        Why is promoting financial literacy important? Because one of the best gifts we can give the young people in our lives is the gift of financial independence – and it’s always best to start early as it sets a precedent. With children the key is repetition. Introducing kids to companies they can relate to and talk about throughout the year consistently reinforces the idea that they have a vested interest in this company.

        Buying stocks for children is also a great opportunity to teach them about money on a practical level, sitting down with them at the end of the year and going over their own portfolio and noting the changes. They might not get it at first but as you repeat the scenario for 5, 7 or 10 years they will begin to understand.

        At CAIM we believe there are 3 key elements to selecting stocks as investments for children.

1.    Choose a company that has products your child can relate to. For example, Proctor and Gamble (PG) sells lots of every day household items from toothpaste to batteries.

2.    The company should have a history of paying dividends. Dividends should be reinvested as they are paid to buy more shares over time. Many of the companies we recommend have a history of increasing their dividend exponentially allowing the investor to buy more shares. This compounding effect can have a tremendous impact on the total return of the investment over time.

3.    Buy companies that are attractively priced based upon the company’s fundamentals. We favor companies with low levels of debt and high levels of cash flow. These companies are better poised to withstand market downturns and have the financial flexibility to grow their business and their dividends.

CAIM’s Holiday List:

1.    Proctor and Gamble (PG, $62.13, 3.1% dividend yield). We like the diversity of products this company sells. It makes for great conversation with children when talking about all their products from household to health and beauty. This company pays a dividend yield above the 10 year treasury and has increased their dividend every year since 1971. It currently sells at a 20% discount to its 5 year price/earnings ratio and has $5.12 in cash flow per share.

2.    United Technologies (UTX, $74.80, 2.3% dividend yield). With only 32% debt and $6.31 per share in cash flow, this industrial company has weathered the recession well. Sikorsky helicopters, Otis elevators and escalators are some well known products this company produces. We also like this company’s commitment to alternative energy options. This year they increased their dividend 10%.

3.    International Business Machine (IBM, $142.89, 1.8% dividend yields). Most households have at least one if not more computers. This cash rich company increased their dividend 18% this year. They have increased their dividend every year for the past 10 years, at one of the worst periods in history for stocks. This company sells at a 10% discount to the S&P 500 and a 10% discount to its 5 year price to earnings ratio.

        Many of these companies offer dividend reinvestment plans (otherwise known as DRIPs) to buy the share directly through the company. Charles Schwab and Company will open up a custodial account with as little as $100. Please call with any questions about how to set up a plan or how to choose companies that are right for your child.

        Enjoy the holiday season!

Copyright 2010, CAIM LLC

Disclaimer: NO CONTENT PUBLISHED AS PART OF THE CAIM LLC NEWSLETTER CONSTITUTES A RECOMMENDATION THAT ANY PARTICULAR INVESTMENT, SECURITY, PORTFOLIO OF SECURITIES, TRANSACTION OR INVESTMENT STRATEGY IS SUITABLE FOR ANY SPECIFIC PERSON. TO THE EXTENT ANY OF THE CONTENT PUBLISHED AS PART OF THE BLOG MAY BE DEEMED TO BE INVESTMENT ADVICE, SUCH INFORMATION IS IMPERSONAL AND MAY NOT NECESSARILY MEET THE OBJECTIVES OR NEEDS OF ANY SPECIFIC INDIVIDUAL OR ACCOUNT, OR BE SUITABLE ADVICE FOR ANY PARTICULAR READER. EACH READER AGREES AND ACKNOWLEDGES THAT ANY SPECIFIC ADVICE OR INVESTMENT DISCUSSED IN THE BLOG MUST BE INDEPENDENTLY EVALUATED BY THE READER AND HIS OR HER ADVISER IN VIEW OF THE READER’S INVESTMENT NEEDS AND OBJECTIVES.

For those of you with questions, feel free to call me at 203.966.2712 or visit www.caimllc.com

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