Ten tips for investors: which stocks to buy
Jonathan Burton from MarketWatch agency has carefully summarized the opinions of leading securities experts and based on them has derived ten recommendations. Their essence is how to increase the value of the investment portfolio, reduce risks and use new trends in the market with maximum benefit.
However, neither Burton nor his "collective mind" managed to predict the main thing: will the tendency to reduce consumer spending prevail in the United States and will this lead to a recession? But under all circumstances, one thing is already clear: financial structures and companies related to real estate are the losers today. But at the same time, the business based on industrial production, energy and high technologies has retained its position.
Komal Sri-Kumar, a leading analyst in the field of strategic planning for such a giant as TCW, believes: "Recession is what everyone has in mind. At this stage, we need to look ahead to the future, which will follow the recession and which will bring with it an economic recovery."
Based on the new realities, it is necessary to follow a fundamentally different investment tactic, different from everything that has been practiced in recent years, says Jonathan Burton. On behalf of MarketWatch, they compiled 10 tips for investors where to direct their money in the next 12 months, so that later it would not be excruciatingly painful for senseless investments.
1. US Treasury Government Bonds: ReliabilityThe US Federal Reserve recently lowered the discount rate again in order to prevent a reduction in consumer spending and business activity in the real estate market and in the banking sector.
According to David Rosenberg of Merrill Lynch & Co. (MER), the US Central Bank has sufficient room for maneuver, and therefore he does not rule out that the discount rate may be lowered in 2008 to 3% and even to 2% before the economy begins to gain momentum.
When the discount rate decreases and the yield falls, the value of securities increases. Buying US government debt is the most reliable way to save your money.
Bernard Baumohl, executive director of The Economic Outlook Group, a forecasting firm, is convinced that "if economic growth slows down, many people will start transferring their money from stocks to treasury debt."
2. The leaders are high technology, energy, consumer sector and medicine
If you don't take into account the financial sector and the real estate market, the rest of the business is not so bad. David Rosenberg recommends paying attention to companies engaged in the export of goods and services in the conditions of a weak US dollar: if the revenue from exports to the EU countries is calculated in euros, then in dollars it is even more.
The most attractive companies for investment, explains Tom McManus, an expert in strategic planning at Bank of America (BAC), are concentrated in such industries as high technology, energy, consumer sector and medicine.
Among the companies that it makes sense to look at, in particular, are: Abbott Laboratories (ABT), Emerson, Johnson & Johnson (JNJ), PepsiCo Inc. (PEP), Procter & Gamble (PG).
3. Not small and nimble, but unhurried and solidIf previously relatively small companies with a rapid increase in the value of their shares were considered more attractive, now it is more prudent to make a choice in favor of large companies with large capitalization.
Sam Stovall, chief investment strategist at Standard & Poor's, believes that in the next 12 months it is worth paying attention to heavyweights, including, for example, International Business Machines (IBM).
4. Believe those who pay dividendsCompanies that, contrary to the general economic and market conditions, increase the payment of dividends, demonstrate their strength and stability.
Bob Doll, chief Securities Investment Specialist at BlackRock Inc., believes that "large diversified companies with a multinational reach, which have enough free capital and which increase dividends, have a good future."
According to Doll, it is worth highlighting such giants as ExxonMobil Corp. (XOM), Chevron Corp. (CVX), IBM, American International Group Inc. (AIG).
5. Don't focus only on AmericaPreviously, when the American economy was sneezing, the rest of the world went to bed with a cold.
Today it's the opposite. "The US economy is slowing down its growth rates, while others are gaining them, says Ernie Ankrim, chief investment strategist at Russell Investments. Don't focus only on the USA." In turn, Audrey Kaplan, manager at the Federated InterContinental Fund, argues that in terms of investment, "out of 36 economies, the French economy is in first place," but other countries should not be neglected.
Among her preferences in France are the oil giant Total SA (TOT) and the telecommunications giant France Telecom (FTE). In Germany, it is worth taking a closer look at BASF, Daimler AG (DAI), Deutsche Bank AG (DB). In Italy to Luxxotica Group. In Asia, to the South Korean steel company Posco (PKX) and Taiwan Taiwan Semiconductor Manufacturing Ltd. (TSM).
6. Flight weather has been established for high technologiesAmerican companies account for more than 56% of sales of high-tech products to foreign markets.
The demand for more advanced products does not dry up. Moreover, as Charles Rotblut, a leading investment analyst in Zacks.com ., "the slower the economy develops, the more vigorously corporations are looking for opportunities to increase labor productivity. And that means investing in software, servers, computers."
Many investment analysts at Zacks are very optimistic about semiconductor companies such as Intel Corp. (INTC), SanDisk Corp. (SNDK), National Semiconductor Corp. (NSM), Micron Technology Inc. (MU). In turn, Stovall from S&P is added to the list of Microsoft Corp. (MSFT), Apple Inc. (AAPL), Hewlett-Packard Co. (HPQ), Oracle Corp. (ORCL), Seagate Technology (STX), Citrix (CTSX).
7. The consumer basket is not going anywhereEven in the most severe times, people will not stop buying food, drink, household goods and medicines.
Consequently, says McManus of Bank of America, it makes no sense to neglect companies such as Coca-Cola Co. (KO), Hershey Co. (HSY), Pepsi, Procter & Gamble, Wyeth (WYE), Medtronic Inc. (MDT), Abbott Labs, Johnson & Johnson. Stovall adds his favorite: Colgate-Palmolive Co. (CL). Kaplan adds AstraZeneca Plc. (AZN), GlaxoSmithKline Plc. (GSK).
8. Industrialists still rule the ballThe weak dollar and the growth of export profits give confidence in the future to American industrial companies, especially those that supply their products abroad.
Companies of the military-industrial complex are in an advantageous position. As Jonathan Burton writes, "these companies are being lifted up by a tidal wave of arms spending around the world, and nothing can be done about it, no matter which party wins next year's US presidential election."
Roblat from Zacks predicts that in the future, double-digit revenue growth will be recorded by General Dynamics Corp. (GD), Rockwell Collins Inc. (COL), and his colleague Doll from BlackRock's adds Lockheed Martin Corp. (LMT), Honeywell International Inc. (HON) and Raytheon Co. (RTN).
9. Do not write off energy companiesShares of oil and other energy companies were in favor with investors, but in the conditions of a possible recession and a low discount rate, their leadership is being questioned.
However, like high-tech companies, they operate on a global scale and often represent a multidisciplinary business. Estimates of their attractiveness vary. Rotblat from Zacks suggests paying attention to National Oilwell Varco Inc. (NOV) and Schlumberger Ltd. (SLB), and his colleague Dollar to Occidental Petroleum Corp. (OXY), Marathon Oil Corp. (MRO), as well as ExxonMobil and Chevron.
10. Banking and financial sector: tomorrow will be better than todayBankers, insurers, brokers, they are all upset, and some are waiting for worse times.
However, Komal Sri-Kumar from TCW believes that it is necessary to look into the long term. The new top managers who came to the leadership of Citigroup Inc. (C) and Merrill Lynch are determined and ready for meaningful steps to rectify the situation. In the first quarter of 2008, the sector may be in the black. "In a year," says Sri Kumar, "everything will change for the better."
Vladimir Mikheev, Director of K2Kapital Information ServicePortal "Eternal youth" www.vechnayamolodost.ru