In 1974, Time Magazine published a science article captioned, “Another Ice Age?” Thirty-three years later, another Time article appeared, this one captioned, “Global Warming Survival Guide.”
Predicting the weather has long been befuddled man and given rise to ancient deities dwelling in various parts of the solar system. Predicting the stock market, even more so. So take the following predictions with a grain of salt and some advice from Sir John Templeton, which is, “Never follow the crowd.”
Salient Statistics and Profile of the 2015 Stock Market
Consider the current market environment: bullish, but cautious. Standard & Poor’s 500 index has rallied from 1,832 points at the beginning of the year to its October 31 performance of 2,018. Earnings and corporate profits have driven most of the growth. Everyone is in love with energy and tech stocks.
However, bearish forecasters foretell a market correction – defined as a drop in stock prices by 10 percent or more – and some even herald a market crash, brought on by unexpectedly low earnings-per-share. The S&P 500 has rallied, true, but perhaps precariously. Most stock growth has come from low-risk investments, decreasing market volatility, which means a lot of bug-eyed investors could head for the hills at the first sign of a correction. Since the Federal Reserve plans to drop its stimulus plan in the forthcoming months, potentially snowballing into a mass diaspora from U.S. Treasury bonds, that correction may be well on its way.
But again, the weather.
Top Picks for Reliable, Growing Technology Stocks
Silicon Valley has long been wooed by Wall Street. Microsoft, Garmin, Intel and other topnotch tech companies boast reliable dividends yielding 2.5-3.1 percent. Goldman Sachs recommends Qualcomm Inc., Samsung Electronics and Garmin as among the best stocks positioned for the Internet of Things, the forthcoming computer web of machines, people and other, well, things. Qualcomm also manufactures Snapdragon processors, which are widely used in high-end smartphones.
Technology companies have always been tempting due to their potential explosiveness growth. Desirable company traits include significant R&D investing and a strong sales team. Since tech products are prone to the “tipping point” phenomenon introduced by Malcolm Gladwell, market penetration is critical. IBM and Hewlett-Packard are safe bets in this regard.
Riding the Wave of Rebounding Real Estate Investment Trusts
Real estate investment trusts (REITs) have been battered like barrier islands since the origin of the Great Recession in 2007. These high-dividend stocks traditionally appeal to the income-investor, who is looking for a steady return and a hedge against inflation. However, the pandemic of property foreclosures at the end of the last decade sent their value plummeting.
Yet REITs are beginning to rebound. They are issuing new shares, which should allow them to buy available properties at their current bargain-basement prices. One expert recommends Arlington Asset Investment for its sky-high dividend yields, while David Landis says Vornado Realty Trust, which specializes in upscale office buildings in New York City and Washington, D.C., may be able to engineer its resurrection with $3.4 billion in cash. Corporate real estate is in a stronger position than suburban and vacation property.
Top Growth Picks in Consumer and Industrial Energy
In 1950, the population of the United States was 151,000. Sixty years later, it was twice that, and as the population grows like ivy, so does its thirst for gasoline, propane, and other fuels. Propane has long been popular in the American Snowbelt. Since it has been recently identified as a fracking agent, its value may skyrocket, which means the company to watch is AmeriGas Partners L.P. It boasts a five-year total return of 113 percent and shows no signs of abating. Other energy picks include Schlumberger N.V., a global oil services magnate, and Valero.
High-Risk Technology Stocks Promise Big Rewards
3D printing technology is used everywhere from the General Motors chop shop to the fabrication floors of prosthetics from biomedical companies. Unfortunately, 3D printing companies have experienced rocky performance in the stock market. But two companies stand out: 3D Systems and Stratasys. These turnaround stocks should continue to grow during 2015 and afterwards.
Artisanal Food Movement Inspires Investment
As many know, much of the post-recession economic growth has gone into the hands of the privileged few, while most Americans make the same time-weighted income they made in the 1960’s. After 2007, many families exchanged steak for peanut butter. Share prices for Jiff and Peter Pan exploded.
Current hot buys are spawned from the artisanal and health food movement. Panera Bread, Artisanal Brands, and Whole Foods have posted fabulous growth in recent years. Where might the next “foodie” revolution be?
Cheese. The U.S. is the largest cheese-producing nation in the world, and as domestic interest blossoms in brie, gouda, swiss and cheddar, so does business. The Chicago Mercantile Exchange has offered cheese futures since 2010. Topnotch equity picks include Kraft and American Dairy. Sadly, stock investment is limited since publicly traded dairy companies are few and far between.
Big Pharma Looks to Capitalize on Emerging Asian Market
Even though the economic growth of China and India has slowed in recent years, its middle class continues to surge upwards with a thirst for luxurious chauffer cars and western pill medicines. Big pharmaceutical companies like Merck, Pfizer and Johnson & Johnson, all blue-chip companies with dozens of patented medicines, look to the emerging Asian market for big returns. Each of these nets 20-30 percent of net sales through Asian and other emerging markets.
Online Banks Promise High-Risk, High Rewards
Ally, Simple, EverBank, CapitalOne 360 – these are all successful online-only banks with no overhead, no branches, just accounts in the cloud. Most Internet banks offer high-yield accounts with minimal fees and penalties. Popular with Millennials, online banks are prepared and ready for take-off. Top picks include EverBank Financial Corporation and Bofl Holding Inc., the front for Bank of Internet USA.
As 2014 nears its finale, Wall Street analysts continue to recommend biotech, energy, healthcare and communication technology sector stocks. But as Sir John Templeton also said, “Do your homework.”