The result is that stocks have been marked down to quite tempting valuations. These apparent bargains look even better when compared to the alternatives in a record low interest rate environment. Just because prices are cheap does not mean they cannot become even cheaper. The trick is to assess their valuations with realistic earnings assessments in an effort to invest with a reasonable margin of safety.

Current analyst earnings estimates for the 500 companies in the S&P 500 for 2011 range from $80 to $95, down from $85-$97 a few weeks ago. At $80, that’s a price-to-earnings ratio (“P/E”) of 13 today. That’s about average for the last century but a bit low for the last twenty years.

The P/E ratio for this market average got down to around 8 in 1949, 1974 and 1980. In those days, the economy was smaller and much more cyclical with big swings from the auto and steel industries. Since then, it has not only grown but become much more profitable with increases in productivity from advances in computer and communications technology. Globalization has brought more competition but also opened new markets.

At the height of the dot.com bubble in 2000, the S&P’s P/E had risen to 32. Today’s valuation is around the low for the last twenty years. Should the economy reverse into the dreaded “double-dip” recession, the “E” for earnings denominator would decline. This seems unlikely and the pace of the economic recovery seems highly likely to continue at a middling 2%-3% pace. The P/E ratio thus might actually get a bit smaller but the prevailing anxieties have already substantially reduced downside price risk though it may take a few weeks or even months for stocks to regain their vigor.

P/E ratios are normally used to value (or promote) individual stocks. Used in connection with an eye toward overall market conditions, they can show interesting contrasts. For example, Concho Resources (CXO-$59), a Midland, Texas-based developer of established oil and gas fields has a current P/E of 24. This drops to 15 if it hits the current forecasts for next year. Given oil prices no less then than today’s levels, it probably can and the stock is a buy for more aggressive investors.

In contrast, Total (TOT-$46), the big French international energy company with sales over 200 times that of Concho has a P/E of only 7. Analysts forecast modest growth that would drop this ratio toward 6 for next year. Concho offers faster growth and Total a 6% dividend yield. Total is also a buy and more suitable for the income investor.

Amazon.com (AMZN-$124) has a current P/E of 51, dropping to 35 on forecast earnings. Apple (AAPL-$243) has lower ratios of 18 and 14. Both are burning up the consumer market but Apple is not only bigger but also growing twice as fast. Amazon had has become the world’s most successful retailer but the contrast leads me to recommend selling Amazon and buying Apple.

In this shaky market, I continue to advocate closed end bond funds in the higher yield category like Western Corporate High Income (GDO-$19-8%yield) to build up reserves. The more venturesome will like Balchem (BCPC-$24), a $240 million (sales) specialty chemical stock with a current P/E of 22. It’s growing both sales and earnings at rates over 20% and even pays a small dividend.

No column next week. I’ll be in London but can be reached at aic@cox.net.

China still ranks number 145 in per capita Gross National Product. It faces interesting challenges from India (#175) as both gear up to serve world markets. Japan (#11) seems stuck in deflation but its growth rate of exports bottomed out last year and its economy is growing with the chances of a “double-dip” recession negligible.

The same is true in the US (#6). The housing industry that powered much of the growth of the prior decade is suffering lower prices with every report. Based on past cycles, prices will not bottom out for at least another year, perhaps two. Construction is labor intensive and this slump is adding 1-2% to the unemployment rate. It also takes a chunk out of the balance sheets of homeowners with resulting damage to their spending (and borrowing) spirits.

The most recent home sales report was the lowest in the 15-year history of this economic indicator. As the forthcoming General Motors IPO suggests, government spending to stimulate vital sectors of the economy can be beneficial to all parties. The housing industry could use another round of federal stimulus through tax credits or other means. With our legislators locked into wrestling grips with each other, any relief here will have to wait until after the elections.

Stimulus through low interest rates is not waiting for any elections and the Federal Reserve may be relied upon to keep rates at their current record lows for another year or two. Investors are aiding these endeavors by deserting stocks for the apparent relative safety of bonds.

The results are amazingly low yields with money market funds offering around a tenth of a percent. IBM just issued a three-year note paying a whopping one percent. The government is paying only 3.56% for 30-year bonds and Norfolk Southern just sold a 100-year bond with a 5.95% coupon.

I recommend the stocks (but not these bonds) of both companies for their decent dividend yields and reasonable expectations of dividend increases as well as for gains in their stock prices whenever the market recovers its breath. Both yield 2% or more now and have increased their dividends annually for eight or more years, a period spanning the recent financial panic.

Although understandable, the emotions that produced the panic are still so prevalent that the current bargain valuations on blue chip stocks may become even bigger bargains as stockowners sell stocks in order to buy the apparent security of bonds, gold or whatever may be in fashion.

DuPont (DD-$40), for example, currently pays a $1.64 dividend for a 4.1% annual yield. It might slide a bit pending market stability but in two years, it will have paid $3.28 (more with a dividend increase) and will have almost certainly increased its annual earnings to well over $3.00 a share. Investors need to look beyond the current surface chop to the horizon.

Investors can ease the waiting with bonds that the fearful overlook. Western Asset Global Corporate (GDO-$19), my newest pick, yields 8.3% paid monthly. It is a closed-end bond fund formed last year and currently trades at a 5% discount from net asset value. Its yield easily outweighs any risks.

The “Hindenburg Omen,” named for the ill-fated dirigible because “Titanic” had already been taken, is a collection of technical indicators such as a concurrent increase in both new highs and lows that allegedly predicts a market plunge this September. So does the “Cardinal Climax,” which is based on an allegedly unusual astrological lineup of the planets.

September is historically weak in stock market history and October always revives memories of crashes in 1987 and 1929 but investors will do better if they try to resist the siren calls of these invitations to market timing, recalling the long-range record of stocks of 10.9% annually over 30-year periods.

Most of us don’t have 30 years to wait for results but yielding to current emotions in an attempt to speed things up drags returns down. Pessimism reigns now but market surges only a few years ago whetted demand for books like “Dow 36,000,” “Dow 40,000” and even “Dow 100,000.” A ladies investment club in Beardstown, Illinois sold over a million books with the book jacket showing a 23% annual return over 10 years.

Euphoria faded when a magazine discovered in 1998 that this return included the monthly dues of the ladies. An auditor found that the true return was 9%. Litigation followed, the publisher allowed swapping Beardstown books for other titles but the ladies continued their club, still buying blue chips. No one seemed to care that the auditor also found that their return over a longer period was 15%.

With pessimism high and interest rates low, the market presents investors opportunities to buy blue-chip stocks at remarkable values. Achieving above average investment returns requires a sense of patient discipline. It is not easy to persist through the roars of the panderers of easy solutions but the rewards will come.

I continue to recommend DuPont (DD-$42), which is gaining fresh attention as fires in Russia drive grain products up. In addition to its traditional coatings and chemical lines, DuPont’s fastest growing lines are in agriculture, both from seeds and crop enhancing products like insecticides. The company also is expanding into higher margin pharmaceuticals. With the economy expanding, even at a painfully slow rate, DuPont’s cyclical sectors are moving it toward $3 earnings per share this year, up from $2.03, while paying a 4% dividend.

Johnson Controls (JCI-$29) is a similar cyclical company trading at a very reasonable valuation of 14 times 2010 earnings and 12 times 2011. Yield is 2% and both its auto interior lines and environmental building management systems are doing nicely. So are the various engine lines of Cummins (CMI-$81). Both companies are benefiting from sales to the industrial sector, which continues to outpace consumer groups.

Intel (INTC-$20), with a 3% yield from a dividend raised for six straight years is unusually so valued among the technological sector. It is introducing “Light Pack” fiber optic cable technology that may replace USB and other cables. IBM (IBM-$128) with a 2% yield and 14 consecutive years of dividend increases is another winner. Disciplined, patient investing in stocks like these will always beat grasping for omens.

That rally eclipsed the sorry performance in May and brought the averages a bit ahead for the entire year before slipping back as the parade ended. Without more good news to excite investors, I would not be surprised if stocks slipped further back before their starting point for the year until we get well into the fall, a traditional haven for market strength.

The next round of earnings arrives in October, which will probably usher in a year-end rally, taking stocks to overall double-digit returns for the full year. The economy remains stuck in a sluggish recovery with the official unemployment figure almost in double digits. Corporate earnings are doing better than the overall economy as companies as their managers have figured out how to squeeze more profits out of trimmer workforces.

Beginning with the first signs of economic descent three years ago, companies also began to build up their cash reserves to record amounts. The result today from an investor’s point of view is a menu of solidly capitalized industrial and technology stocks trading at quite reasonable valuations. Financial and consumer stocks are still working their way toward stability and some sectors like housing will need another year or two.

Corporate earnings, investor sentiment and interest rates are the three major factors impacting stock prices. Investor sentiment continues to shroud its usual fluctuations between greed and fear in “unusual uncertainty” as noted by the Federal Reserve Chairman. The Fed continues to take steps to flog the recovery onward with its recent actions cementing an environment of continuing record low interest rates until 2012.

That will benefit more aggressive bond funds and mortgage trusts like Franklin Templeton Limited Duration Trust (FTF-$13) and Annaly Mortgage (NLY-$18). Both borrow short-term while investing in longer-term securities to produce investor yields well beyond those available from less innovative investments.

Some of the closed-end bond funds that I have recommended like Credit Suisse Income (CIK-$3) have developed enough other buyers to narrow or even eliminate the discount between their asset values and stock prices that prevailed when first mentioned. FTF still has a 4% discount to go with a 7% yield on its monthly distributions. More critically, the average duration of the bonds it holds is only three years, which will ease the pressure when bond yields start going up again.

Annaly is a sophisticated real estate investment trust concentrating on leveraged portfolios of government mortgage securities, principally FNMA, GNMA, and Freddie Mac mortgage-backs with implicit government guarantees. The result is a variable but high yield, currently over 15%.

The principal risk would be a return to higher interest rates but prevailing Federal Reserve policies combined with investor anxieties make Annaly a remarkable buy. For those who want a bit more, Annaly’s stable includes Chimera Investment (CIM-$4), which invests in mortgage securities a notch less in quality, producing a current yield over 17%,

These and the other high yield funds or REIT’s I have been recommending are excellent placeholders until the market gets its breath back. Irvine-based Broadcom (BRCM-$33) is among the technology companies with soaring earning whose price needs only a little market help.

Within a statement on his commitment to enhancing life through giving, Warren Buffett said that his “wealth has come from a combination of living in America, some lucky genes and compound interest.” He noted that our economy “rewards someone who saves the lives of others on the battlefield with a medal, rewards a great teacher with thank-you notes from parents, but rewards those who can detect the mispricing of securities with sums reaching into the billions.”

His advice is always worth considering and I remind readers that charitable lending is available at www.kiva.org. This site groups $25.00 individual loans into small loans to entrepreneurs in the developing world. I have enjoyed participating and all my loans have been repaid in full.

Looking for mispriced securities turns up a promising bunch of blue chip, dividend-paying stocks in large companies trading at quite reasonable valuations. Why these values exist is unclear. This may stem from investors trying to recoup past losses too quickly by diving into the more publicized stocks being talked about by the media or through stepped up selling of these highly liquid securities by holders needing funds.

For whatever reason, buying on relatively low stock valuations during the early stages of a business recovery has proven rewarding in stock market history. This should be even truer in the existing record low interest rate environment. 3M Company (MMM-$87), for example, has increased sales and earnings mildly during the recession but is forecast to hit $5.75 earnings per share this year, an increase of over 20%. It yields 2.4%. To get this yield on a certificate of deposit today, a five-year commitment is needed. Moreover, 3M has increased its dividend for 51 straight years.

Yes, we might slump into a second recession and “the Rockies may crumble” but 3M’s dividend is here to stay. DuPont (DD-$41) is a little more aggressive with a more cyclical customer base. It yields 4% and should hit $3.00 a share earnings for the full year, a bigger jump and an even more modest valuation on earnings.

United Technologies (UTX-$72) is growing on improving business conditions with its jet engines, Carrier and Otis divisions and on government spending for aerospace and helicopters. Yield is 2.2% with 16 consecutive years of dividend increases. Its earnings have been stable and this year will see around $4.71, another reasonable value. This company continues strong research spending into innovative products like an unmanned version of its Black Hawk helicopter.

With painful unemployment levels persisting, consumer stocks demand caution. Clorox (CLX-$64) has been a steady performer in difficult times. Earnings will be around $4.25, up 7%. Yield is 3.4% on a dividend recently increased for the 33^rd. straight year.

Sigma-Aldrich (SIAL-$57) and IBM (IBM-$130) have the smaller dividend yields (1-2%) typical of technology companies but excellent histories of dividend increases. The diversified engine lineup from Cummings (CMI-$80) is powering it to the largest cyclical pickup in this report. Earnings are soaring as orders for big trucks resume after deferral during the recession. Increasing business spending this fall will power the overall market; stocks like these will provide rewarding leadership as their prices move toward normality.

August is often a soft month and stocks may pull back before football season begins but I still expect a more sustained market rally this fall that will take us into overall double digit returns for the full year. There are neither signs nor historic precedents for slipping back into a recession at this stage.

Earnings reports have not only shown increased profits for companies, a relatively predictable result from downscaling their work forces, but they have also shown increasing sales. Almost three-quarters of companies reporting have beaten expectations on their top line revenue numbers. Combined with favorable surprises on bottom line profits, it’s clear that analysts have short-changed the vigor of the economic recovery. While stock prices may pause for breath, the continuing rollout of earnings reports will rebuild investor confidence and support the next leg up.

Although that will probably see the Dow Jones Industrials above 11,000 by yearend, the slow pace of the economic recovery will prevent a breakaway. The probable end to government stimulus spending, persisting high unemployment, tight credit and weak housing market will slow the economy to a 2-3% growth rate.

All this is plagued by “unusual uncertainty,” in Fed Chairman Bernancke’s words. Overly sensitive media magnify every new uncertainty from fiscal crises in Southern Europe to inscrutable currency changes in China. Some of this is passing. Only recently, the daily news was dominated by preparations for a public hanging of first, Goldman Sachs, and then BP. A financial reform bill then emerged and the damage from the vast oil spill was arrested.

As wounds heal, the recovery period from the financial crisis leaves an investing environment in which nervous business leaders and consumers have shuffled trillions of dollars in cash to the sidelines. For once, inflation is almost totally absent and interest rates are absurdly low. This is a favorable playing field for large, solidly financed companies whose earnings reports reflect their ability to compete successfully.

DuPont (DD-$41) reported that its June quarter profits almost tripled. Sales and margins were also up. Its CEO said she expected growth to return “to a more sustainable pace” in the latter half although the company increased its 2010 earnings forecast to a range from $2.90 to $3.05. That equates to a Price/Earnings ratio of only 13 DuPont’s dividend yield is 4.1%. Its stock is an exemplary buy.

Transportation stocks are gaining momentum, a traditional accompaniment to an economic recovery. Two successful prime movers are FedEx (FDX-$83 and UPS (UPS-$65). Both companies beat forecast earnings and, more critically, raised their outlooks for the rest of the year. UPS yields 3%, FedEx less but offers a faster growth rate.

Norfolk Southern (NSC-$55) also raised its forecast and brought back its furloughed employees. SeaSpan (SSW-$11), the leading container ship carrier, just raised its dividend and now yields 4%. Storm clouds are clearing and it’s time to begin boarding.

Overall, the results are favorable. Comparisons with the dreadful numbers from a year ago are easy and commentators are trying for clues from hints or forecasts of the next quarters. Intel (INTC-$21) was one of the first to report. Its results were excellent and its stock price moved up briefly before attention deficits disorders kicked in on the investing mob. These results should not be forgotten and Intel deserves fresh consideration for almost any investor on its news.

Intel’s quarterly earnings of .52, well above Wall Street forecasts of .42, and a 34% increase in sales inspired its CEO to declare the June quarter the best in the company’s 42-year history. Even AMD, its pet sparring partner, managed a good quarter, proof that the PC and server markets are strong. Fretting about overseas markets by the fearful then choked off Intel’s rally and the stock, one of my ten largest positions, remains a strong buy. Intel yields 3% and has increased its dividend for 6 straight years.

The applause died away for Intel, then IBM (IBM-$121) and Goldman Sachs both announced earnings ahead of forecasts on sales that fell a bit short of expectations, again triggering nervous selling. Goldman bounced back but IBM languished. IBM is also a member of my top ten and remains a buy. It raised its earnings guidance again and will probably bump its dividend before too long. IBM yields almost 2%, it has raised its dividend for 14 straight years and its valuation is unusually modest.

Valuations for the overall market are quite restrained, a normal condition following an economic slowdown and one that often is a prelude to a market surge. None of this helped Google (GOOG-$477) when its earnings report showed very strong global growth but sales disappointed analysts although a closer look shows that advertising revenues for Google are surging. I give it a 12-month price target of $650 to $700.

All these maneuvers set the stage for the quarterly announcement by Apple (AAPL-$254), the world’s most successful technology company. Net income rose 78% to $3.25 billion on a 61% sales increase to $15.7 billion, a record quarter, even beating its best holiday seasons. It sold 8.4 million iPhones, including 1.7 million new iPhone 4’s, which were only released three days before the quarter ended. It sold 3.3 million iPad’s, which were introduced during the quarter. My 12-month price target of $350 looks solid.

Outside the recession-resistant technology sector, the economic recovery continues to sputter along. More government stimulus spending would help the jobless but the political climate seems too hostile for such measures. The result will be continuing low inflation, possibly even threatening deflation, and a continuing low interest rate environment.

That will favor large, well-financed companies. The tech sector is almost booming with sales to businesses boosting productivity. Cisco (CSCO-$23) will continue to dominate networking and Oracle (ORCL-$24) has a secure and expanding share of the global business software market. EMC (EMC-$19) is similarly well positioned in data storage and I am adding it to our buy list.

While prevailing anxieties and political uncertainties will cause continuing volatility, the stocks recommended here are all reasonably priced. Owing them will be more profitable than trying to outguess investor reactions.

Comparisons will be easy with the second quarter of 2009, when the financial crisis was still in full flower. Headline comparisons over the next few weeks will show 2010 second quarter earnings at least 20% higher than last year. That will probably spark buying interest although more refined direction will come from reading the finer print in company comments on demand for products and forecasts for the rest of 2010.

The economy continues to be troubled by an irregular recovery with persisting troubling high unemployment contrasting with robust earnings in some sectors like technology. The risks of  “double-dip” backsliding into another recession are trifling despite fear mongers still getting media attention. More significant is the continuing pattern of many of those secure in sheltered sectors like Wall Street doing quite well while other Americans struggle daily in the housing, construction and retail sales sectors.

The resulting disparities spill over into increasing political discord and continuing uncertainties that overhang stock prices. For those fortunate enough to have both jobs and funds for investment, the results for stocks create attractive opportunities. Interest rates and inflation are remarkably low, earnings are improving and seasonal factors are favorable. The selling wave that plagued the markets in recent months will need a few more weeks to exhaust itself but the autumn should see a surge.

News in the investment world has a nearly hypnotic quality in its immediate impact. Investors should always try to keep a perspective between temporary events and those indicating more fundamental changes. This is something like the difference between weather and climate.

I sold our positions in GlaxoSmithKline as the controversy concerning tests of its leading diabetes drug reflected a cavalier attitude toward the longevity of the subjects. AstraZeneca (AZN-$49) is a more attractive large UK-based drug company with a nice dividend yield and steady earnings growth. Diabetes is reaching epidemic proportions with changing global diets and Novo-Nordisk (NVO-$85) is the innovative leader in its treatment.

BP is another company whose character defects were revealed by the short cuts it took leading to the recent oil spill disaster. While I hope it will be successful with its current efforts to arrest the continuing damage, I believe there is a substantial probability that its ultimate liabilities will exceed its current value. With so many more attractive investment options like Exxon (XOM-$59) available, I suggest holders take advantage of current hopes to exit the position.

In contrast, the problems of Apple (AAPL-$250) with its latest iPhone are a passing technical glitch and not a fundamental character flaw. Sales of its iPad are exceeding expectations and this slight slip presents a chance to add to positions. My price target for next year is $350.

“The future’s not ours to see” as Doris Day sang so memorably but the actions to take are clearer. For the doubtful, Credit Suisse Income Fund (CIK-$3) is paying 9% in monthly dividends.

Current negative stock price momentum, egged on by the media, encourages investors to look toward the past. Frustrations resolving the oil spill and the wretched slow pace of restoring jobs are difficult barriers to looking toward recovery. While it may take a few weeks for the market to come out of its current skid, its future looks better.

The recent financial crisis led to many banks and other financial institutions being tarred, feathered and ridden out of town. This was richly deserved and scared other big companies into cutting back their expansion plans, trimming employees and building up cash reserves. These cost cuts and the disappearances of competition have created a current environment in which surviving companies, will disproportionately benefit in the early stages of the recovery.

This can be seen in the strong profit growth for most big U.S. companies in the last quarter of 2009 and the first quarter of this year. The prevailing gloom infected stock analysts yet the first quarter showed 78% of U.S. companies beat the earnings forecasts.

Analyst attitudes have not improved but corporate earnings have; results from the just completed second quarter are likely to continue to beat forecasts. The stage is set with record low interest rates, an accompanying absence of inflation (certainly free of any inflationary upward wage pressures) and record levels of cash hordes among the big companies.

In the stock market, valuations are remarkably subdued. Earnings for the twelve months for the S&P 500 are currently estimated around $88. At its current level of 1040, that’s a price to overall earnings ratio slightly less than 12, leaving plenty of room to the upside.

A liftoff to the upside will need something more than bargain prices for ignition. Causes could be a capped oil spill, positive earnings surprises or even some legislation achievements from Congress, although that may require Divine intervention. Pending these events, investors can ease their nerves by hedging with Ultra Short S&P 500 (SDS-$38), a derivative that replicates in reverse the price action of the S&P 500 by a 2:1 factor. With yields on cash reserves almost undetectably low, I suggest a bit of this to sitting on cash.

I still recommend higher yield corporate bond funds such as Credit Suisse Asset Management (CIK-$3) or Alliance Global High Income (AWF-$14. Both pay monthly distributions at a current 9% yield from diversified portfolios of bonds. ING Global Real Estate (ING-$6) has similar returns from a portfolio of REIT’s.

Readers have inquired about Tesla Motors (TSLA-$18), the new public developer of electric autos. As much as I am delighted to see innovative technology in this oil-dependent industry, I think its publicity may be ahead of its investment prospects. The popular auto sector has suffered for years from global excess capacity, now aggravated by surging growth in the growing numbers of competing Chinese automakers.

These competitive price pressures will bear on the forthcoming reoffering of General Motors stock although, like all taxpayer-stockholders, I hope this will be successful. Investors will probably be better off with stock in less glamorous companies like Waste Management (WM-$32). It yields 4% and its CEO spends time with his employees rather than running off to his sailboat like the CEO of BP (BP-$32), which yields zero.

Dividend trends indicate possible relief in the next few months. This year so far, 136 companies in the Standard & Poor’s 500-stock index have boosted their dividends with only two downsizing. This contrasts with 2009 when 78 cut their payouts and the increases in the first half already almost equal last year’s total of 157.

Much of the damage took place among financial companies. Their stocks attract a lot of publicity but I have been avoiding them as I feel their depressed stock price levels are fully deserved. Citigroup alone has required several government resuscitations since the 1930’s.

The House of Morgan, split in two by the bank reform legislation that followed the Depression has thrived through numerous trials. Despite the prevailing fears, the global economic recovery continues. Europe’s current fiscal problems will give a short-term lift to U.S. markets and it’s banks. J.P. Morgan Chase (JPM-$37) is sound enough but will have its hands full with post-merger and balance sheet cleanup issues for another year. Its cousin, Morgan Stanley (MS-$24), is ready for takeoff.

It is competing successfully with Goldman Sachs, which must devote some energies to legal and reputation issues. ((Goldman should be grateful to BP for taking its place in the ducking stool of public rage.)  Morgan Stanley will soon be reporting earnings for the June quarter. Analyst forecasts are unusually uncertain now but I expect the company’s results will show close to $3.00 earnings ahead for the full year, which should ignite favorable stock price action

Earnings reports are quite likely to spark widespread price moves upward. The summer is usually a lazy period for stocks as they mark time until the second half is well underway. Historical patterns are somewhat favorable for stocks during the second half of the year. After a period of rising dividends, the outlook is encouraging as increasing dividend declarations reflect assessments by company managers that the futures of their business look better.

Unfortunately, these futures look better now in manufacturing, medical and technology companies than in consumer-related sectors burdened by continuing high unemployment. The Federal Reserve and the central banks of Europe will hold interest rates down for months, if not years, enhancing investment opportunities in dividend-rich stocks. Valuations are approaching historical bargain levels but successive waves of bad news are keeping buyer optimism underwater.

That is unlikely to change for a few more weeks until we get some good news like a capped oil spill or some favorable earnings reports but it will come. In the meantime, careful buying will be rewarding. Bristol-Myers (BMY-$25) is an exemplary buy candidate. It yields 5%, has boosted its dividend for 9 straight years and will earn around $2.17 this year, up 17%, a promising combination of growth at a very reasonable valuation.

Restrictions on offshore oil drilling mean increased business for oil tanker companies. Nordic American (NAT-$28), which now operates 20 supertankers, pays a variable but high dividend. It will announce its next dividend on August 6 and I expect the resulting annualized yield will exceed 10%.

Despite the current market weakness, I still expect positive returns for the year. That means price targets at least 8-10% ahead of current levels.