Table of Contents

1.  Market Outlook
2.  Western Digital (WDC)
3.  Double Your Dividends
4.  Additional Investing Ideas
5.  Investor Trivia -- The Shipping Industry
6.  Featured Topic -- Utility Stocks
7.  Free Investing Resources

Today's Top Stock Picks

Western Digital (WDC) is at Multi-Year Highs and Poised to Go Higher
Western Digital has a proven track record in the tough, cyclical disk drive industry. This industry has seen many companies come and go, but WDC has ridden out the low points and is showing signs of strength.
Read More. . .

Double Your Dividends by Investing in Foreign Companies
Imagine going to a supermarket and shopping in just half of the aisles. This is essentially what investors with no foreign exposure are doing with their portfolios. Read More. . .

Market Outlook

-- Nathan Slaughter
Co-Editor
TopStockAnalysts Digest

Western Digital Corp. (NYSE: WDC, $29.95) is a leading maker of hard disk drives. Western Digital's drives can be found in corporate servers, desktop computers, portable computers, backup applications and consumer electronics, like DVRs, gaming systems, karaoke systems and video surveillance systems. In short, they're everywhere.

You can buy a Western Digital drive directly, but half the company's output goes to original equipment manufacturers (OEMs), who put them in their own products.

As such, Western Digital is caught in a never-ending race to make its products better and cheaper, and to do it before the competition.

It's a cutthroat business, and because of that, hard drive makers have never been great long-term investments.

No longer in business are old names like Integral, Tandem, Control Data, MiniScribe and Connor Peripherals. Little Iomega, a thrilling and very profitable investment back in 1995 after the Zip drive came out, has lost money in five of the last six years and was just "bought" (in a complex transaction) by Great Wall Technology, which is majority-owned by the Chinese government. Last year, Seagate (NYSE: STX) bought Maxtor for $1.9 billion. And early this year, Western Digital acquired Komag for $1 billion.

That leaves only four companies -- Western Digital, Seagate, Samsung, and Hitachi (NYSE: HIT) -- manufacturing over 98% of the world's hard drives. Samsung and Hitachi, of course, are electronic behemoths; hard drives are just a fraction of their business.

But why would you want to invest in a hard disk maker anyway? Because historically, these companies have provided many opportunities to make big money quickly, and it looks like we're entering one of those periods today.

What typically happens in the industry is that as business improves and profits increase, companies expand so they can increase revenues. But the increased production, typically the result of expansion by several firms, means capacity begins to exceed demand, so manufacturers cut prices to move product. Trouble is, that reduces profitability, and as earnings fall, investors desert the stocks. And it's not until demand for product increases and allows product prices to stabilize that earnings can creep up and the good times return.

All the while, of course, all companies are involved in the never-ending race to increase storage capacities and reduce prices.

So why is WDC attractive today? Because it's strong... stronger than Seagate and stronger than the broad market.

Right now, the industry's fundamentals are outstanding -- lower production from a couple of Asian competitors has kept inventory levels low, while demand remains very strong thanks to an explosion in mobile device sales (the firm's mobile-related drive sales were up +55% in the third quarter) and healthy growth in computer and digital video recorder shipments. The result: third-quarter earnings crushed estimates by +39%, and the firm upped its fourth-quarter outlook. All told, we expect the positive news flow to continue for the intermediate-term.

WDC peaked at $25 per share in February of 2006, fell to $16 by March of this year, and has been in a strong uptrend since. The best aspects of the chart, however, occurred just in the past few weeks -- the surge at the start of November was caused by a great earnings report, the stock held up well during the market's November slide, and it's push to new multi-year peaks came on a higher fourth-quarter forecast. WDC is extended to the upside, but we don't believe a big pullback will come. You can buy a little here, and look to add on strength.

But if you buy, I caution you not to fall in love with the stock. If you do, I guarantee it'll break your heart.

Imagine going to a supermarket and shopping in just half of the aisles, or opening a restaurant menu and limiting your dinner choices to the entrees listed on just one of the pages.

This is essentially what investors with no foreign exposure are doing with their portfolios.

In years past, most of the world's stock market capitalization was locked up in the United States. However, trillions of dollars in market wealth has been created overseas in the past decade, and there are now actually more opportunities outside our borders than within.

Take banks, for example. In terms of assets, seven of the top ten banks in the world are foreign-based companies. And the story is similar across most other industries, from retailers to steel makers to electronics manufacturers -- many future industry bellwethers are located outside the U.S.

And aside from a greatly expanded pool of investment ideas, there are several other reasons to consider foreign investments. Most importantly, stock prices are heavily influenced by economic expansion and overall corporate profitability. And as the world's largest economy (with a gross domestic product (GDP) in excess of $13 trillion), it is virtually impossible for the U.S. to deliver the robust growth rates that it has posted in decades past.

Fortunately, many other countries around the world are at far earlier stages on the economic development path and should see much higher growth rates than the United States for years to come. As you can see from our chart, while the U.S. economy is still dominant, it simply can't match the growth that is taking place in markets like China and Russia.

Considering the link between economic expansion and equity prices, it's not surprising that U.S. stocks have struggled to keep pace with the rest of the world.

From September 2002 to September 2007, the S&P 500 delivered average gains of about +12% per year. While that return is certainly respectable, it lagged most foreign benchmarks -- stocks jumped nearly +20% per year in Europe, +25% in Pacific Asia, and +40% in Latin America over the same time frame.

Clearly, there is something to be said for casting a wider net, and investors who have done so have been well-rewarded. Over the past 15 years, the benchmark S&P 500 has not once been the top-performing stock market worldwide in any given calendar year. In 2006, for example, it failed to even break the top ten -- the +14% return of the S&P 500 wasn't even within shouting distance of, say, Venezuela's impressive +156% surge.

Dividends Play a Leading Role
Of course, it goes without saying that in many developed markets overseas -- just like in the United States -- a large percentage of those total returns are comprised of dividends. In fact, those who invest in foreign stocks will find that yields throughout Europe and in many other regions are actually far superior to those typically seen here.

According to Jill Evans, manager of the Alpine Dynamic Dividend Fund (ADVDX), average yields on foreign exchanges are currently running about double the meager average payout of roughly 2% among S&P 500 firms -- and fatter quarterly paychecks are just the beginning.

Whether it's Brazil, Hong Kong, or Turkey, dividends send the same message in any language. Specifically, recurring dividends represent millions (or even billions) in annual payments to shareholders. And companies that can meet that obligation in both good times and bad can usually be counted on to deliver consistent cash flows.

Furthermore, dividends can also act as a built-in safety net in a falling market. As the price of a stock drops, its yield rises -- thereby attracting investors. This tends to prop up dividend payers in a down market and can even set a floor on the share price.

Simply put: dividend-paying stocks can usually be trusted to deliver above-average long-term returns with less volatility than the broader market. According to renowned professor and market researcher Jeremy Siegel, the top 100 highest-yielding stocks in the S&P 500 have returned +3% more per year on average than the index as a whole.

And if dividends can make that much of a difference in our low-yield domestic environment, imagine what the generous 6%, 10% . . . even 15% yields commonly found overseas can do for your portfolio. These are exactly the types of stable, high-yielding foreign companies we'll introduce our readers to every month in High-Yield International.

It will be the only publication of its kind dedicated exclusively to finding high-yielding securities in foreign markets. Our mission will be to show our subscribers how they can earn steady yields of 8% . . . 10% . . . even 15% or more by investing in these foreign millionaire makers.

To learn more about High-Yield International, visit this link.