The City of Burbank has received the Certificate of Achievement for Excellence in Financial Reporting from the Government Finance Officers Association (GFOA). Awarded for its Annual Comprehensive Financial Report (ACFR) for the Fiscal Year ended on June 30, 2023, this marks the 40th consecutive year that the City has received a distinguished award from the GFOA.
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I had completely forgotten about an old 401(k), so I asked a financial planner what to do with it
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- I have a 401(k) from an old job, so I asked a financial planner what to do with the funds.
- Since I’m self-employed, he suggested I put the funds in a traditional IRA or a Roth 401(k).
- If I had another employer, I could also roll the funds into a 401(k) through my employer.
I’m spending quality time before the end of the year combing through my finances to find anything that needs to change or improve. I want to close out 2023 by fixing any lingering money mistakes or to-do list items that I should have taken care of months or years ago.
When I was looking through my current retirement fund, I remembered that I had an old 401(k) from a job I was laid off from in 2015. I haven’t thought about the money inside of that account in years. It’s hardly growing and I haven’t contributed to it since I lost that job.
Unsure of what to do with the money inside that old 401(k), I chatted with certified financial planner Faron Daugs for advice. Here are three suggestions he shared for anyone who has old retirement funds from previous jobs.
Find Missing 401(k)s Capitalize can help you find lost 401(k)s for free. From finding your old 401(k)s to helping you pick an IRA, Capitalize can help save you time, money, and hassle.
1. Roll your old 401(k) into your current employer’s plan
While this option doesn’t apply to me because I’m self-employed, one route that Daugs suggested is rolling your old 401(k) plan into the 401(k) plan offered by your current employer. People change jobs all the time, so Daugs often sees people who have multiple 401(k) plans with money in each of them. While you could keep these 401(k) plans separate, Daugs said there are small benefits that could come from merging these plans.
“Combining your 401(k) plans into one can help you consolidate funds and potentially stop paying extra fees that could be associated with managing two separate 401(k) plans,” he said.
2. Roll your old 401(k) into a traditional IRA or Roth 401(k) at an outside custodian
If your current employer doesn’t offer a retirement contribution plan or you want to take your money out of a 401(k) and put it in a different type of retirement fund, Daugs recommended rolling the money directly into a traditional IRA or Roth 401(k).
A traditional IRA is a retirement account where the money in the account is generally pre-tax and grows tax-deferred. A Roth 401(k) is similar to a Roth IRA and a 401(k), where you make post-tax contributions and earnings inside the account grow tax-free.
There are a few benefits of going this route.
First, Daugs said that if you had money in an old 401(k) and wanted to use that cash to buy an individual stock that you feel has long-term growth potential, you can do that within a traditional IRA or Roth IRA plan. He said that this isn’t something you can generally do under a 401(k) umbrella.
If you roll the money over, which means directly transferring it from your 401(k) into an IRA, you’re able to keep the money tax-deferred and avoid early withdrawal penalties. Daugs also said going this route means you won’t get taxed on any distributions from your old 401(k) plan.
However, Daugs said that if the money you put into your old 401(k) was pre-tax money, you want to be sure to roll that into a traditional IRA. “If the money originally contributed was a Roth 401(k) contribution, you roll it to a Roth IRA. If you convert the IRA to a Roth later on, and you roll that money from an IRA into a Roth IRA, you would get taxed on the amount converted, but would not have to pay a penalty for moving it out of a 401(k).”
“The benefit of doing a conversion is that going forward, all of the money inside of that IRA or Roth IRA grows tax-free,” he said. “So someone in their twenties or thirties doing this can benefit 20 to 30 years down the road to have a tax-free bucket of money to eventually tap into.”
This is worth considering when you’re doing your financial planning, Daugs said, because that money in a 401(k) is often pre-tax money.
“That means the money in your 401(k) will grow tax-deferred and when it comes time to take the money out when you’re retired, you will pay taxes on the distribution,” he said.
3. Use the money for another investment — but watch out for hefty fees
If you already have a well-funded retirement account and want to use the idle money in an old 401(k) for a different type of investment outside of a retirement plan, Daugs said you can withdraw the money, but likely at a cost.
“You will have to pay income tax on the money you take out of your 401(k) as well as a penalty for withdrawing the money before retirement age of 59½,” he said.
Instead, he recommended that if you want to use the 401(k) money to invest in the best CDs with higher than usual interest rates, you can do so by rolling the money into an IRA that’s at a bank and that offers those types of investments.
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“Semfi from HSBC (derived from seamless, embedded finance) will embed HSBC payment, trade and financing solutions across a range of e-commerce and marketplace venues, including Tradeshift’s own B2B Network.
“This marks a transformative step in Tradeshift’s ability to deliver vital, value-adding services to our network, tackling a key challenge for businesses: access to liquidity, cash flow management and seamless financial integration within supply chains.
“With Semfi now in the mix, we’re ready to rapidly scale to meet the demand for these services across a broad range of businesses.”
What’s next for SemFi?
Although SemFi will launch first in the UK, HSBC plans to expand the service globally over time. The venture is designed to operate as a technology company rather than a traditional bank.
Clients will be onboarded by HSBC, and the bank’s balance sheet will be used for financing, but the goal is to offer a tech-forward solution that meets the evolving demands of businesses worldwide.
With HSBC supporting 1.3 million businesses globally and facilitating more than US$800bn of trade each year, SemFi is set to become a key player in the world of embedded finance. For SMEs, the ability to access HSBC’s services seamlessly within their e-commerce workflows could represent a significant step forward in efficiency and growth.
We recently published a list of 10 Wonderful Stocks to Buy Now at a Fair Price. In this article, we are going to take a look at where Emerson Electric Co. (NYSE:EMR) stands against other wonderful stocks to buy now at a fair price.
In H2 of the year so far, there are signs that the S&P 500 index has been broadening beyond technology leadership and the index is reverting to a more normalized state. This means that there are several high-quality stocks outside of the popular names and investors are required to be diversified. This diversification should not be limited to the style level, but also to the stock level. Market experts opine that the AI theme has largely fuelled the narrow market. This concentration, along with an increase in passive investments, resulted in a significant cycle of consensus positioning and stretched valuations. This led to the vulnerability in the market, which resulted in a sharp correction in July and early August.
As per Fidelity International, when it comes to passive investing in the S&P 500, it demonstrates nearly a third of holdings in only 7 stocks. Considering their dominance, a stumble in performance means the index will see a significant impact, and the investors have already seen some mega-cap technology names that are unable to deliver on strong expectations.
S&P 500 Index – Transition and Concentration
The US equities saw an outstanding performance in H1 2024, with the S&P 500 Index rising 15.3%, as per ClearBridge Investments (A Franklin Templeton Company). The investment firm believes that solid earnings results and fiscal stimulus mitigated the influence of higher interest rates. However, the headline performance numbers, aided by a ramp-up in mega-cap stocks and, more specifically, semiconductor leadership, eclipsed the recent signs of deterioration below the surface.
Since the Mag 7 stocks have disproportionately driven earnings growth over the previous 2 years, ClearBridge Investments expects a rebound in earnings among small-cap stocks in the upcoming 12– 18 months. The investment firm believes that small-cap companies have seen the impacts of higher rates. In 2023, profits for Russell 2000 companies declined ~12%. This year, they are up ~13.6%, and for 2025, the projections hover at around ~31%. If this happens, there might be a broadening of the market which should provide an opportunity for active managers.
Opportunities Apart from Magnificent Seven
Companies that are unable to meet hefty expectations might see a disproportionate sell-off, and the stocks riding the wave of AI might be significantly exposed considering the amount of capital deployed versus the uncertain future environment. Given such trends, Fidelity International believes it is unsurprising that so far in H2 2024, there have been signs that the S&P 500 is broadening beyond tech leadership, with some non-tech sectors surpassing the broader market.
There are abundant high-quality stocks apart from the popular names. This means that dozens of companies in the S&P 500 continue to offer a return on invested capital (ROIC) and earnings growth of more than 30%. This is true for several other quality metrics, reflecting an underappreciated depth of opportunity in the broader US equities.
While diversification remains critical, even looking beyond the Magnificent Seven might not necessarily offer the required diversification considering that the US market remains heavily weighted towards growth sectors like IT. As per Fidelity International, diversified portfolios need negative correlations between assets, but few styles provide consistent negative correlations to quality growth companies. That being said, cyclical value and defensive value remain 2 key exceptions.
To get a negative correlation, the investors are required to avoid an overlap at the stock level. As of now, the US market provides a range of attractive stock opportunities that offer this valuable diversification.
As per ClearBridge Investments, the top 5 stocks now constitute ~27% of the S&P 500 and the top 10 make up ~37%. As per the investment firm, this concentration might stagnate near current levels, with mega caps delivering solid, but slower, earnings growth in comparison to the recent past. The investment firm expects that diversified portfolios should outperform in the upcoming 12–18 months.
With this in mind, we will now have a look at 10 Wonderful Stocks to Buy Now at a Fair Price.
Our methodology
We first sifted through multiple online rankings and ETFs to identify quality stocks with wide moats. Next, we selected stocks that were trading at a forward P/E of less than ~23.65x (since the broader market trades at a forward multiple of ~23.65, as per WSJ). The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Engineers analyzing a complex network of process control software and systems.
Emerson Electric Co. (NYSE:EMR)
Expected Earnings Growth: 23.4%
Number of Hedge Fund Holders: 51
Forward P/E Multiple (As of September 30): 18.45x
Emerson Electric Co. (NYSE:EMR) is a technology and software company, which provides various solutions for customers in industrial, commercial, and consumer markets.
Emerson Electric Co. (NYSE:EMR) has a wide economic moat, which is mainly based on switching costs, and on brand intangible assets. Moreover, the company’s strong geographic presence and diversified customer base further solidify its moat. Emerson Electric Co. (NYSE:EMR) remains confident in its financial health and strategic initiatives. The company continues to focus on integrating National Instruments and potential share buybacks.
The company expects its backlog to increase YoY as it enters FY 2025. Emerson Electric Co. (NYSE:EMR) has been adjusting its strategy to focus on growth areas like innovation and renewable energy investments while, at the same time, managing softer segments. Therefore, Wall Street analysts are optimistic about the company’s future performance and its strategic positioning in the global automation market.
The company sold its remaining interest in the Copeland joint venture, hinting at the fact that Emerson Electric Co. (NYSE:EMR) is focusing on simplifying its portfolio. It highlighted that demand in process and hybrid markets, which is being led by a constructive capex cycle, has been meeting expectations. In Q3 2024, its operating leverage performance exhibited the benefits of its highly differentiated technology. For 2024, Emerson Electric Co. (NYSE:EMR) anticipates net sales growth of ~15% and operating cash flow of ~$3.2 billion.
Redburn Atlantic initiated coverage on 8th July on the shares of the company. It gave a “Buy” rating and a $135.00 price target. Insider Monkey’s Q2 2024 data revealed that Emerson Electric Co. (NYSE:EMR) was part of 51 hedge funds.
Overall, EMR ranks 7th on our list of Wonderful Stocks to Buy Now at a Fair Price. While we acknowledge the potential of EMR as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than EMR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’
Disclosure: None. This article is originally published at Insider Monkey.
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