Why These Stocks Will Continue to Be Number One in 2013
Investing isn’t all about managing returns; it’s also about managing risk.
Risk is high right now in all categories: real estate, stocks, bonds, currencies, and even cash. On the cusp of a new earnings season, the stock market is going to be very choppy, but I do think that it will trend higher.
There is no real need to be buying this stock market. With so much uncertainty and so many risks beyond your control, the sidelines are a good place to be.
But the powerful breakout of blue chip and transportation stocks at the beginning of the year is very meaningful.
Of course, many stock market investors have been sitting on the sidelines for a long time. This was the case for institutional investors until the beginning of the year, when sentiment changed. The advertised certainty of continued low interest rates provided the catalyst for new buying.
The last three earnings seasons reflected the choppiness and the uneven performance of many industries in the U.S. economy. But the stock market always wants to be in front of any economic news, and institutional investors have no other place to put their money.
With so much risk in this marketplace, the standout companies have become even more attractive. And this is what institutional investors have done since the beginning of the year—they have gone after the safest names, because they see all the risks, as well.
Large dividend-paying stocks will continue to be attractive in this stock market for the rest of this year. Many are still not expensively priced, and there should be decent earnings this quarter. Robust earnings are not in the cards, but stability in revenues and earnings is all this market wants.
One standout company that should be able to generate decent earnings growth this year is PepsiCo, Inc. (NYSE/PEP). The company’s chart is featured below:
Chart courtesy of www.StockCharts.com
On the stock market, PepsiCo leaped 10 full points since the beginning of this year. The stock is trading at an all-time record high, but it still offers a 2.7% dividend yield and is currently trading around 20-times its trailing earnings.
PepsiCo reports on April 18. Wall Street continues to have a number of “Buy” ratings on the stock, but it is trading right at its median price target, according to Thomson Reuters’ First Call.
It’s tough to make the case for buying the stock (or the stock market) right now, but last quarter, the company did beat Wall Street expectations, with particular strength from its Latin American operations. PepsiCo is a company that’s worth keeping an eye on and to consider as a long-term investment whenever the shares are down.
Investor sentiment improved a lot in March. Now at the start of first-quarter earnings season, investors are jittery. The numbers are likely to be all over the map. This is a wait-and-see kind of stock market. There is just so much out there that can derail it.