The Motley Fool's Weekly Editors' Picks

Fools were out and about this past week in an investing world jam-packed with actions and ideas. Here are three articles you might find useful as you decide how to invest your money.

Why Simple Investments Win
Fool analyst Morgan Housel makes the case that boring can be beautiful for long-term investors. He pulls up data showing that, since 1995, Microsoft stock has been outperformed by stocks including Clorox and McDonald's (NYSE: MCD  ) , which returned 560% and 540%, respectively, to Microsoft's 511%. Stock powerhouse Altria (NYSE: MO  ) clocked the competition with a 1,300% gain over the same period.

"The fact that any period -- a 17-year period, no less -- can be found during which a company with a virtual monopoly on a booming industry underperforms the dullest of products is extraordinary," Morgan wrote. Altria is in a class by itself, Morgan reported, being the single best stock to own from the 1950s to the early 2000s. The Marlboro maker returned nearly 20% a year for 50 years. "During a period when new industries transformed the lives of nearly everyone in the developed world, the most money was made in a company that stuffed tobacco into paper tubes the way it had for more than a century," he wrote.

Morgan draws two lessons from his research: (1) Valuation always matters, and (2) simple products that rarely change often make better investments than those undergoing breakthroughs. A company that has to keep innovating faces a tougher time than a company that thrives on a product like toothpaste or bleach.

Read the article for more insight on why simple investments might be right for you.

Is the Party Over for Dividend Stocks?
Morgan also talked a bit more about valuation during a recent edition of the MarketFoolery podcast. Dividend stocks are good investments, he said, but some have been pushed too high by investors desperate for income from their investments. "When you start chasing something in search of yield without much respect to valuation, it usually doesn't end well," Morgan said. He noted that some utilities and telecoms are trading at their highest value in a decade or two, pushing their yields down. "It's hard to make the case that the risk/reward trade-off there is very favorable anymore," he said.

Asked to name names, Morgan said he owns shares of Consolidated Edison (NYSE: ED  ) but has cut back his position and wouldn't buy more at the current price. It's done very well in recent years, but the stock's yield is under 4%, Morgan said, adding: "If you told someone a few years ago that a slow-growing utility stock would yield less than 4%, I think they would have laughed at you. That's one I definitely wouldn't be buying right here."

Watch the video for more insight on which dividend stocks might be too pricey.

3 Keys for the Rest of 2012
Energy stocks are likely to remain volatile, according to Fool analyst Dan Caplinger, and this could provide investors with opportunities to buy. The price of natural gas, kept low by oversupply, recently saw a bounce, but the U.S. Natural Gas ETF (NYSE: UNG  ) remains down 25% for the year, Dan reported. Yahoo! Finance tags its 52-week range at $14.25 to $46.40.

Solar energy stocks have been whacked even harder, Dan noted. "First Solar (Nasdaq: FSLR  ) has lost half its value and Chinese solar makers have proved especially vulnerable to poor conditions in the industry," he wrote. First Solar stock has ranged over the past 52 weeks from $11.43 to $134.21, according to Yahoo! Finance.

"Until the macroeconomic picture gets clearer, you can expect to see more chances to get into energy stocks," Dan wrote. "If you share the long-term view that rising demand for energy will inevitably move prices higher, then these pockets of weakness should give you good buying opportunities."

Read the article for more keys to the rest of 2012.

All revved up and ready to crank up the power of your portfolio? Then check out the free Motley Fool report "The Only Stock You Need to Profit From the NEW Technology Revolution."

Fool online editor Kris Eddy owns no shares of any stocks mentioned in this article. The Motley Fool owns shares of Microsoft, McDonald's, and Clorox. Motley Fool newsletter services have recommended buying shares of McDonald's and Microsoft, as well as creating a bull call spread position in Microsoft. The Motley Fool has a disclosure policy.

We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (1) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 07, 2012, at 7:22 PM, MrSinnister wrote:

    When will Discovery Labs (DSCO) finally get some love? I mean they have 2 FDA approved products that go into distribution in the 4Q, with the FDA approval coming in March. They only have 43 million outstanding shares, with a current market cap of 125M which nearly multiplies with every 10 cent increase. They are going to distribute a drug for Respiratory Distress Syndrome for infants in the US and European markets, and they have TREMENDOUS upside, already up 60 percent on the year. Add to that two more drugs awaiting approval, Aeroserf, that is in a collaboration with Batelle to get streamlined and fine-tuned and Surfaxin LS, a liquid version of their already FDA-approved drug Surfaxin. How this stock stays in the 2 range is amazingly shortsighted.

    Value of Surf LS + Afectair: 275million

    Shares O/S: 43mil

    Tell me why we can't see $40+/share with DSCO. Note that my sell target is below this, but I expect the stock to soar once it gains momentum. Imagine that liquid surfaxin penetrates the market quickly and gets great reviews by practicing docs (which it should). Surf LS will be even better. And Aerosurf even better after that.

    Facts:

    1. one approved device

    2. one approved drug

    3. $40 million in cash

    4. no debts

    5. no preferred stocks

    6. no impending warrants (outside of the 5yr 5M at 2.80)

    8. exclusive rights

    9. excellent pipeline

    10. Newly partnered (Batelle for R&D)

    11. MAA approval soon

    12. New device new drug launch soon

    13. Mkt Cap 128 million ???

    At 3 times sales, this is already $400 million firm, and that is $10 PPS. DSCO === Hidden Gem.

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