As investors I believe we were all happy to watch the month of August pass by as we turned to September for a fresh start. August was horrible with the first 10 days posting loss of more than 11% of the Dow Jones. The second half of the month began to trend higher which gave many a reason to be optimistic about the month of September but after considering what ahead I am no longer optimistic.
So far in the month of September the Dow Jones has already lost nearly 2.5% as flat unemployment, a poor manufacturing index, weak construction data, and a federal lawsuit against financial institutions plagued the market. I am expecting more losses from the markets during September, as there are several key events scattered throughout the month, each presenting a strong chance to move the markets lower if investors hear something unpleasant.
- Sept 8 - President Obama spoke on jobs and unveiled a proposal to create new jobs. The speech was very direct in stating that we as a country need this proposal to be approved in order to move forward. This announcement is not what I expect to drive the market lower, although it could. I expect Congress' reaction to drive the market lower as I expect them to be reluctant to agree to this plan that will increase spending. If the market believes that Congress may not approve the plan, or if Congress does not approve this plan, it could drive the markets lower as investors may believe that Washington is running out of options.
- Sept. 15 - Greece needs more aid. Greece has arguably the most significant financial crisis in Europe, which plays a large role in its overall financial health. Investors are hopeful that Greece receives aid quickly without any problems. A large portion of the loss experienced in early August was related to the European debt crisis as high sovereign debt affected the stock of American banks. Financial institutions across America posted losses with the same intensity as European banks, despite being completely different institutions.
- Sept. 20 - All eyes will be on Ben Bernanke, once again, as investors are still hopeful the chairman will implement some type of quantitative easing. Mr. Bernanke spoke in Jackson Hole last month, insinuating that federal aid was being explored and could potentially come in the future. I do not believe that investors will get anything positive out of this speech. Bernanke was correct on his analysis of the economy as large corporations are posting strong earnings and regardless of speed, the economy is growing.
- Sept. 30 - The short-sale ban for many European financial stocks will be discussed and possibly lifted for the countries that implemented the regulation. I do not believe the ban will be lifted as the countries are in no position to open the banks to more loss. However, I do not believe the ban has been successful, and further reflects an act of desperation. Despite its relevance, if the ban is lifted, I believe it will have a strong impact on financial institutions in America since our banks trade heavily on global financial news. I cannot imagine U.S. markets trending higher if the ban is lifted, regardless of its meaning.
These events are almost perfectly positioned throughout the month to cause potential distress within the markets. Investors have a pessimistic view as the market is cautious to post large gains on positive developments but trends very low on news with little importance. This reflects our consumer confidence levels, which are at lowest levels in several years, as investors are not confident in our markets or economy.
Despite the upcoming events and the pessimistic view of our economy there are several stocks that I believe are good investments and will possibly trend higher over the next 12 months. These stocks are presenting a good opportunity with low prices and a solid dividend. Below is a brief look at 10 stocks that I believe are good investments while the market trades with such volatility.
|Stock||1 month perf||YTD perf||1 yr perf||Cap||P/E||Yield||Industry|
|VALE||10.69%||-20%||-2%||$144.3 B||5.83||5.35||Metal Mining|
|TOT||1.2%||-13%||-7%||$104.5 B||6.40||6.95||Oil & Gas|
|NLY||7.16%||-2.3%||-0.74%||$16.97 B||6.10||14.85||Misc. Fin. Serv.|
|STX||1.38%||-26.6%||-1.3%||$4.60 B||10.14||6.53||Comp. Stor. Dev|
|EXC||7.5%||3.12%||1.7%||$28.5 B||10.73||4.89||Elec. Utilities|
|DUK||8.92%||5.6%||8.4%||$24.8 B||12.24||5.32||Elec. Utilities|
|DTE||12.2%||9%||3.9%||$8.36 B||12.12||4.76||Elec. Utilities|
|RPM||6.70%||- 16%||2.4%||$2.40 B||12.8||4.53||Chemical Manuf|
|PAYX||3.5%||-13.8%||1.40%||$9.64 B||18.73||4.66||Business Serv.|
VALE (VALE) is a Brazil-based metals and mining company. The company pays a solid dividend and has experienced strong movement over the last month as it recovered from 52 week lows. The company released earnings that caused the stock to significantly drop, which accounted for the majority of its 20% loss. The company's income, revenue, and assets all improved by large margins during last the earnings report yet did not meet expectations. I believe the stock is near its bottom and will rise from this point, as the company has shown strong signs of growth based on earnings. With a price to earnings under 6 and a yield of 5.35 I believe this could be one of the best investments for gains and security over the next year.
Total (TOT) is a France-based oil and gas company with operations in more than 130 countries. The company has consistently increased its revenue despite turmoil in Europe and the Middle East. It has also increased assets each of the last 3 years which includes a 60% stake in Class A & B common stock of the fast growing solar product company SunPower Corporation. I believe this company is offering a great opportunity to buy a growing company at a discounted price, and with a yield of nearly 7.0 I believe the benefits are far too great to pass up.
Annaly Capital Management (NLY) owns, manages, and finances a portfolio of real estate related investments. This stock will give investors the perfect opportunity to return large gains while waiting for the economy to improve. The stock has a yield of 14.85 among the best of any stock traded in the market. The only risk the company presents is its very high debt to assets ratio which means it could be vulnerable to recession. Yet the company has traded in a consistent range for 2 years with investors holding the stock because of its dividend which has been consistent for many years.
United Microelectronics Corporations (UMC) manufactures semiconductor products. The company has experienced a large amount of loss since January as a result of disappointing earnings. I believe this stock shows promise because of the amount it's lost, its large amount of cash, low debt, and balanced price over the last month, which leads me to believe the company has stabilized. The company paid a high dividend, which has been somewhat inconsistent over the years but with so much uncertainty in the economy I expect the company to continue paying a high dividend since the company has a large sum of cash. UMC is working to correct its issues and I believe could see significant improvements in the near future which could result in large gains.
Seagate Technology (STX) designs, manufactures, markets, and sells hard disk drives. The company has lost 26% YTD after announcing several quarters of mixed guidance and less income. Yet the company has consistently posted higher revenue but is spending more trying to better its products. The stock is still trading near even for the year and has now balanced during the last month, with a high yield and low price to earnings I believe this stock offers security with little risk in posting more loss with a strong chance of posting large gains.
DTE Energy Company (DTE), Duke Energy Corporation (DUK), Exelon Corporation (EXC) are all utility companies that present a strong buying opportunity for investors. Each of these stocks are trading near the top of its 52 week range and I believe could break through and see new highs. Electric Utility companies usually trade in tight ranges with investors seeing gains from the high dividends that utility companies provide. However, each company has posted high revenue, income, and assets year-over-year on both a quarterly and yearly basis. These stocks have slowly trended higher while paying out consistent dividends. I believe that each of these stocks will create new 52 week highs within the next 6 months, as earnings continue to improve.
Paychex (PAYX) is a provider of outsourcing solutions for small to medium-sized businesses. The stock has traded in a fairly consistent range over the last 3 years with revenue and income being consistent. However the company has announced moderate gains on its income statement during the last 2 quarters, has no debt, and is acquiring assets to help grow the company for the future. I believe this is a safe investment with a yield of 4.66 and the stock trading the bottom of its 3 year range, I believe it offers a strong investment.
RPM International (RPM) is trading near its 52 week low after more than 2 years of trending higher. The stock did post a brief loss in August of last year only to recover and trend higher. I believe the stock is presenting the same opportunity as I expect it to trend higher on better earnings for the upcoming year. I do not believe the stock will trend lower than its current position therefore investors who purchase can take advantage of its strong yield and likelihood to see gains during the next year.