Battery Makers Are In the Hot Seat

The fires reported by General Motors (NYSE: GM  ) earlier this week were just the latest in a string of bad news for battery makers. It has also left battery manufacturers scrambling to reassure customers that their chemistry is safe.

Valence Technology (Nasdaq: VLNC  ) released a press release reiterating that its batteries were safe and GM and LG Chem are working hard to try to find the root cause.

Before we get too worked up about a battery fire a week after a crash test, I will point out that new technologies often have hiccups like this and since it doesn't appear to be immediately dangerous to drivers it shouldn't be a long-term problem. As a former research and development engineer who started an inadvertent fire or two, I have confidence they'll solve the problem.

But maybe, just maybe, the Chevy Volt fire will be good for A123 Systems (Nasdaq: AONE  ) . The Volt battery is made by LG Chem, a Korean company that won the contract over A123 when the company was in its infancy. If A123 can prove to have safer technology, this could help it win contracts in the future.

Pink slips at A123 Systems
For now, A123 has to deal with its own problems of slower-than-expected demand and mounting losses. That has forced the company to lay off 125 workers at its plant in Michigan. The company says the layoffs are temporary, but the way things are going right now, who knows if they'll ever come back.

This isn't the end of the world
The battery fire is bad news for everyone from A123 Systems to Tesla Motors (Nasdaq: TSLA  ) and Toyota (NYSE: TM  ) . As these companies try to overcome high costs and uneasy customers, every bad news story is bad for the industry. But I don't think this is what will determine the success or failure of electric cars. For that we have to look at consumer demand, which simply isn't strong for EVs right now. That's more important than a fire that will leave the headlines in a week or two.

Interested in reading more about A123 Systems? Click here to add it to My Watchlist to find all of our Foolish analysis on this stock.

20 Dividend Monsters That Hedge Funds Love The Most

We are concerned about the Fed’s inflationary monetary policy and the huge budget deficits of the Federal government. We think high dividend stocks will perform much better than treasury bonds over the next decade. Under the current market situation, we strongly recommend investors to play defensively by investing in high dividend stocks instead of government bonds. One of the practical ways to pick good dividend stocks is to invest in what hedge funds are bullish about. Insider Monkey tracks 300+ hedge funds. Most of these hedge funds employ fundamental analysis to make investments. Below we compiled a list of stocks with at least 5% dividend yield and over $5 billion market cap that hedge funds love the most. The market data is sourced from Finviz.

Ticker	Company	Dividend Yield	No of HF
VZ	Verizon Communications Inc.	5.18%	33
LMT	Lockheed Martin Corporation	5.21%	30
MO	Altria Group Inc.	5.59%	28
T	AT&T, Inc.	5.98%	27
NLY	Annaly Capital Management, Inc.	14.71%	27
CTL	CenturyLink, Inc.	8.30%	21
EWZ	iShares MSCI Brazil Index	6.14%	19
FE	FirstEnergy Corp.	5.18%	18
AGNC	American Capital Agency Corp.	19.34%	17
SCCO	Southern Copper Corp.	8.61%	16
RAI	Reynolds American Inc.	5.53%	15
AVP	Avon Products Inc.	5.59%	15
WIN	Windstream Corporation	8.69%	15
NYB	New York Community Bancorp	8.51%	13
HCN	Health Care REIT Inc.	5.56%	11
EPD	Enterprise Products Partners LP	5.47%	10
AEE	Ameren Corporation	5.08%	10
ETE	Energy Transfer Equity, L.P.	6.35%	7
LINE	Linn Energy, LLC	7.42%	7
JNK	SPDR Barclays Capital High Yield Bond	7.98%	6

Verizon Communications Inc (VZ) is the most popular high-dividend stock among hedge funds. There were 33 different funds with VZ positions at the end of September. VZ returned 6.45% since the end of the third quarter, versus 6.98% for SPY. VZ has a dividend yield of 5.18%, a market cap of 109B and a P/E ratio of 15.51. Phill Gross and Robert Atchinson’s Adage Capital Management had the largest position in VZ among the 300+ hedge funds tracked by us. They invested $153 million in VZ shares.

Another mega-cap stock, AT&T Inc (T), is also on top of the list. There are 27 different hedge funds invested in T at the end of the third quarter. Since then, T returned 2.31%. It has a market cap of $170B, a P/E ratio of 14.59, and a dividend yield of 5.98%. Phill Gross and Robert Atchinson were bullish about T as well. Their Adage Capital owned $238 million of T shares. Cliff Asness’ AQR Capital Management also had $100+ million invested in T.

Annaly Capital Management Inc (NLY) has a double-digit dividend yield. The $15.8B market cap stock has a dividend yield of 14.71%. At the end of September, 27 hedge funds reported to own NLY. Since then, the stock lost 1.86%. It is likely that NLY is trading at a discount as its P/E ratio is relatively low: it has a P/E ratio of only 8.5. Bill Miller’s Legg Mason Capital Management had more than $100 million invested in NLY.

Altria (MO), Lockheed Martin (LMT), CenturyLink (CTL), Brazil ETF (EWZ), And First Energy (FE) are also among the most popular high dividend stocks. A portfolio of these 20 stocks will provide enough diversification for investors. The fat dividends they pay will deliver better returns than long-term treasury bonds. Moreover, hedge funds do not usually buy these stocks for their dividends. Instead, hedge funds buy these stocks for capital gains. Therefore, we think these stocks will not only deliver decent returns through their high dividend yields, but also generate attractive returns through capital gains.

Disclosure: I am long T, CTL, FE.