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Santoli: Grandma's portfolio may be overvalued

Blue Chips
Studio_3321 | Getty Images

Is it possible to pay too much for top quality? Can the ability to sleep at night be overvalued?

Investors should be asking these questions as they try to navigate a market that continues to reward the anointed "quality" stocks — those stable blue chip names that now look almost as expensive as they are popular and boring.

Sure, the ripping 12 percent rally from the panicky Feb. 11 market depths was initially animated by a surge in the riskiest, most-hated stocks, inflicting maximum suffering on overeager short sellers and believers in the global recession scenario.

Yet the strength in dicier, more jumpy stocks did not really come at the expense of those "defensive" large-cap stalwarts in the consumer staples, telecom and utilities sectors, which are still handily beating the broad market year to date.

Participation in the equities seven years after the start of the bull market remains grudging and shadowed by macroeconomic worry, and so investors have a strong preference for perceived safety and decent dividend yields — stocks that act somewhat like corporate bonds, in other words.

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