And why is this worry a good thing?

Because, as all experienced investors know, bull markets climb a wall of worry!

And that’s what this bull market is doing now!

As a result, I’m more optimistic than at any time in the past few months, about both the short- and long-term prospects of the market.

And I’ve got a great stock to recommend to you!

It’s in the insurance business, which seems appropriate following the previous section on dogs.

Its name is Reinsurance Group of America (RGA).

And Roy Ward, the editor of Cabot Benjamin Graham Value Letter, recently recommended it. He wrote:

“Reinsurance Group of America (RGA) is the second largest provider of life reinsurance in the U.S. Reinsurance Group also offers annuity, critical care and group reinsurance. The company guarantees insurance contracts for insurance and other financial companies and sells its products in 25 countries around the world. The company also sells life and disability insurance to consumers in the U.S., Canada, and abroad. It has over $2.6 trillion of life reinsurance in force backed by a strong balance sheet with conservative bond investments.

“Reinsurance Group is in position to capitalize on the significant growth opportunities in the U.S., Canada, India and China. Revenues increased 1% and EPS rose 19% during the last 12-month period, spurred by improved market conditions and higher prices. We believe strong growth from its international operations as well as a boost from recent purchases will drive EPS higher by 6% during the next 12 months.

“RGA’s shares are clearly undervalued at 6.8 times current EPS with a 1.4% dividend yield. RGA shares sell at a huge 42% discount to current book value. The balance sheet is strong, enabling RGA to take advantage of additional opportunities in the reinsurance industry. Higher interest rates could add significant income from RGA’s conservatively invested bond holdings. We fully expect RGA’s stock price to increase to our Minimum Sell Price of 77.52 during the next one to two years. RGA is low risk.”

Sounds good to me. And I can add a few more details.

First, Roy has added the stock to his Classic Value Portfolio. This portfolio, composed of eight select holdings, has gained 28.2% in the past 24 months, compared to 16.8% for the Dow. Longer-term, the portfolio is up 173% since inception in November, 2002, compared to just 35.4% for the Dow.

Second, RGA had been trading as high as 64 back in July, so getting it at the current price is like getting a 22% discount.

And third, financial stocks were among the hardest-hit sectors this year, so stocks like RGA have a lot of upside potential.

For conservative, patient investors, I recommend it highly.

Even better, I recommend that you consider a no-risk trial subscription to Cabot Benjamin Graham Value Letter, so that you can get updates on RGA and other undervalued stocks every week!

For more details, click here.

I’ve been discussing the overall market a lot lately (if you didn’t catch last week’s market video, you can watch it here) so today I think we’ll ignore it–and focus on stocks that ignore it too (more or less). Below are three recommendations from the latest Dick Davis Dividend Digest. Each one of these three stocks is a conservative dividend payer with relatively low correlation to larger market moves. Sounds pretty good right about now, doesn’t it?

The first is Macquarie Infrastructure Company (MIC), which yields about 3%. MIC is one of the few stocks that has managed to stay above its 50-day moving average lately, and the strength has not gone unnoticed: it was recommended by two analysts in the latest Dividend Digest. The first was George Southerland, editor of Special Investment Situations, who wrote on October 25:

“Macquarie Infrastructure Co. owns and operates a handful of infrastructure assets consisting of relatively basic services where cash flows are predictable. The flagship asset is a 50% equity interest in NJ-based International-Matex Tank Terminals, or IMTT, that operates a bulk liquid storage terminal business that stores petroleum products and an array of chemicals. Capacity is over 43 million barrels, and the business isn’t particularly sensitive to the economy since storage contracts last from three to five years. IMTT enjoys a distinct competitive advantage as one of its main facilities (Bayonne) is located near New York harbor and can load and unload ships quickly due to the depth of the water in front of its docks. … A kicker here involves the dividend, currently at $0.20 per quarter for a 3.2% yield. Management is working with its partner in the IMTT investment to distribute excess capital that the business is generating. We anticipate an increased distribution probably beginning in Q1 2012, and could see the dividend nearly double within a year. Note also that a rising payout should prompt capital appreciation from the shares. MIC is a buy up to 26 and becomes particularly interesting on dips below 24.”

The second Macquarie recommendation came from Jennifer Dowty, a managing director and portfolio manager at Manulife Asset Management who writes for Investor’s Digest of Canada. On November 18, she wrote:

“On November 2, the company reported strong operational third-quarter results, with revenue climbing nearly 18% year-over-year. Five analysts rate Macquarie a ‘buy.’ Their average one-year price target is US$29.50 a share. A key catalyst for the company is speculation that management could substantially boost the dividend in early 2012. … The company has been unable to resolve a dispute regarding distributions with the co-owner of International-Matex Tank Terminals. A hearing on the issue is set for January 9 and the company anticipates the process will be completed by the end of March. But if the outcome favors Macquarie and the economy is good, the company is likely to raise the dividend by roughly $0.70 a share.”

Our next stock is very small–its market cap is only $78 million–but it is actually hitting new 52-week highs right now. White River Capital (RVR) pays a 4.5% dividend. On October 14, Eric Dany, editor of Stock Prospector, wrote:

“There’s more upside ahead for this sub-prime auto finance company because they are buying back shares and growing their financing portfolio. … The share repurchase program could remove 6.9% of the outstanding shares, which would boost book value to about $25.00. The sub-prime auto finance company operates Coastal Credit in 24 states. They acquire the subprime notes through franchised and independent auto dealers and then service the notes. … My earnings estimates are $2.25 in 2011 and $2.50 in 2012. With a P/E ratio of 10x my 12-18 month target price is $25.00 a share. … Strong Buy.”

RVR looks a little over-extended here though, so wait for a pullback before buying in.

Finally, a perennial Dividend Digest favorite, with a 7.6% yield, recommended by Roger S. Conrad and Elliott H. Gue in MLP Profits on October 28:

“Linn Energy (LINE) has hedged all of its oil output through 2013 and all of its natural-gas production through 2015. The firm has boosted its average daily hydrocarbon output by more than 30% over the past 12 months, leading to a 30% surge in third-quarter cash flow. These solid operating results enabled Linn Energy to cover its quarterly distribution by a margin of 1.1 to 1. Management expects to cover its full-year distribution 1.18 times. Management also continued to opportunistically lock in favorable pricing with new hedges. The firm also repurchased 530,000 units at an average price of just $32.76, some 15% below the current price. CEO Mark Ellis projects that Linn Energy’s capital investments will continue to deliver quarter-over-quarter production growth of at least 6%. … Few energy producers are lower-risk plays than Linn Energy LLC; the stock rates a buy up to 40.”

LINE can be volatile at times, but the 7%-plus yield is such a draw that most sell-offs are quickly corrected. The current weakness (such as it is) will probably prove to be another such buying opportunity. LINE looks like a good buy right here for the large dividend.

Until next time, hang in there.

P.S. Learn more about Macquarie Infrastructure Company (MIC), White River Capital (RVR) and Linn Energy (LINE), as well as other top high-yielding dividend-payers featured in Dick Davis Dividend Digest.

But that has not been the case in the current market.

The current market is not being driven by fundamental, technical or sentiment factors–it’s being driven by domestic and foreign political situations … and I don’t have any analysis tools for politics.

Economists were appointed to replace leaders in Greece and Italy, with the hope that they will help repair their economic status. Initially, the news was well received by investors–at least initially.

In the U.S., investors have been concerned about the U.S.’s debt situation since the showdown last summer over raising the debt ceiling. Now the so-called debt supercommittee has failed to reach a budget compromise and neither party is willing to negotiate.

How does this impact the market?

The market’s fundamentals are actually pretty decent. Earnings season was stronger than expected, and the bulk of companies appear to be on the right track. During the height of earnings releases in October, the S&P experienced one of its best monthly performances in history. This was at a time when political rhetoric was in a lull, allowing the market to move on the back of some positive news.

Now that the political rhetoric has picked back up and earnings season is coming to a close, investors are fleeing equities. (Although the low volume shows that it hasn’t been a mass exodus.) Investors aren’t comfortable enough to add to their stock holdings, but they also aren’t ready to jump ship en masse.

Meanwhile, U.S. Treasuries continue to attract investors, and I don’t understand why.

Treasury yields are at or near record lows and the U.S. has debt problems of its own. How safe is it to buy debt instruments of a country with a budget deficit problem and a government that is unable to cooperate enough to fix it?

To me, a long-term investment in Treasuries seems like a sucker’s bet. Eventually, the economic and political turmoil will settle down and interest rates will start to climb, causing the price of Treasuries to fall. Investors who buy Treasuries now get low yielding investments with little upside potential for the long haul.

One analyst on Bloomberg described dollar-backed investments as the best of the worst, saying “the dollar is the fastest horse at the glue factory.” I had never heard this expression before, but it made me laugh as I realized he was right.

So how do you invest in this market?

I can tell you that I have cut back on equity holdings and increased cash and fixed income holdings. The two funds I have been adding are the iShares iBoxx Investment Grade Corporate Bond Fund (LQD) and the SPDR Barclay’s High Yield Bond Fund (JNK).

The LQD is a fund of the highest-rated corporate bonds. Right now, corporations are sitting on cash levels not seen since 1963 and thus their ability to pay their debts is much higher than that of the U.S. government. The LQD also has a considerably better yield than the 30-year Treasury Bond–it yields 4.5 % compared to 2.94%.

The JNK is quite the opposite of the LQD as it invests in junk bonds. I have noticed that JNK moves more like a stock fund than a bond fund. When the market dipped in the bear market of 2007-2009, the JNK dropped as well, but not nearly as much. When stocks rallied from March 2009 to March 2010, the JNK moved in lockstep with the S&P 500.

However, there is a big difference between the JNK and the S&P 500 SPDR (SPY): The JNK yields 7.88% compared to just under 2% for the SPY.

By adding these two funds, I have lowered risk and increased yield, while still retaining the potential for capital gains. During uncertain times, accomplishing these three things seems prudent.

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Last Saturday, I discussed five growth stocks that could benefit from holiday shopping. Today, I’ve got five value stocks that have been featured in Cabot Benjamin Graham Value Letter and could see a boost when consumers open their wallets.

Without further ado …

Bed Bath & Beyond (BBBY): Bed Bath & Beyond is benefiting from both sides of the recession: with people hunkering down at home more, they’re spending money to improve their nests … and as people re-enter the workforce after long bouts of unemployment, they’re spending some of their newfound incomes on home improvement. The company sells an assortment of everyday low-priced domestic goods and home furnishings, as well as other items, through its Bed Bath & Beyond, Christmas Tree Shops and buybuy BABY stores. The company operates 1,142 stores in all 50 states plus Puerto Rico and Canada. Although its locations are spread out over a wide geography, Bed Bath & Beyond aims to supply its stores with goods that fit regional climate and demographics, a strategy that has proved profitable. The company has a strong balance sheet, which should support future expansion.

GameStop (GME): GameStop is the top retailer of software, hardware and game accessories for video game systems made by Sony, Nintendo and Microsoft. Even more important during these rough economic times is the fact that GameStop is the largest reseller of user video games and PC entertainment software. GameStop has 6,670 locations in 17 countries and sells products through its website. The company is focused on developing its distribution of downloadable content, which surged a huge 60% in 2010 and is expected to rise 50% a year for the next four years. Downloadable content is the way of the future, so this focus should serve the company well for years to come.

Kohl’s (KSS): The same trends that are driving the dollar store segment higher are working in Kohl’s favor as well. The company operates specialty department stores that feature national, private and exclusive brand merchandise priced to provide a good value to customers. The company’s private and exclusive brand goods make up 48% of sales and shield it from the competition. Kohl’s has just over 1,000 outposts primarily in the Midwest, Mid-Atlantic and Northeast areas of the U.S. selling quality apparel, shoes, accessories and home goods to middle-income consumers seeking value and convenience. Kohl’s, which initiated a dividend earlier this year, has seen website sales grow in recent months.

Nike (NKE): I’ve written a lot about Under Armour (UA) and I still believe the company has a lot of growth ahead. However, long before Under Armour even existed, Nike was paving the way for the industry both companies would later inhabit. Despite Under Armour’s success in the sports apparel industry, Nike is still the big dog in town. The company is the top seller of footwear, apparel and accessories for athletic and recreational activities. Nike sells its products to 23,000 retail accounts in the U.S. and in about 170 other countries, giving it broad global exposure. New golf products and women’s footwear are just two areas that have provided growth for the company in recent years, giving Nike a strong balance sheet with which it can continue to expand. Exposure to the fast-growing emerging markets and the 2012 Olympics should provide growth.

Ross Stores (ROST): Ross sports a story similar to Kohl’s and is benefiting from the same trend towards value and convenience. The company operates over 1,000 stores in 27 states and Guam that sell apparel, shoes, jewelry and home furnishings. Ross offers brand-name merchandise at 20% to 60% below regular department and specialty store prices by scooping up manufacturers’ cancelations and overruns. The company’s strategy is to keep low in-store inventories to boost turnover and reduce the need for further discounts. Ross has plans to expand into new areas and the lagging economy should send more consumers its way. And just last week, Ross reported its 11th straight quarter of profit growth, indicating that discount-seeking shoppers are still flocking to the retailer.

To get full write-ups, including specific buy and sell prices, on the stocks mentioned above and other high-quality value stocks, check out Roy Ward’s latest recommendations in Cabot Benjamin Graham Value Letter.