With the year almost coming to an end, it makes sense to review what existing and future investment strategies make the most sense. Obviously, there are many reasons to be negative and it seems like most people and most investors are bearish on the prospects for risk assets like stocks. You can gauge the bearishness simply by looking at how many billions of dollars are currently invested in Treasury Bonds that yield nearly nothing.
However, there were many reasons to be positive about the economy and real estate just a few years ago, and most investors did not see past the optimism that existed back then. That leads one to wonder if too many investors are unable to see past the current pessimism.
There are many reasons why forward thinking investors might be well rewarded by turning less bearish before everyone else does. Tobias Levkovich is the chief U.S. equity strategist at Citi Investment Research, and he believes a housing recovery, energy, and other factors could lead to a major stock rally in the coming years. A recent CNBC article details his bullish view, and it states:
"The investment community is distracted by having lost 50 percent-plus in stocks twice since 2000, the plunge in home prices, peak-like profit margins, employment challenges and a potential European sovereign debt/banking crisis,” Levkovich wrote in a note to clients this week. “While we do not expect the markets to react to these drivers in the near term, their coalescence could generate a much more impressive rally over the next few years.”
An economic recovery and ensuing bull market would mightily benefit banks, insurance companies, automakers and heavy equipment companies. Here are a number of stocks to consider buying in the coming months, before the next bull market:
Bank of America (NYSE:BAC) has been hard hit by new regulations, lawsuits, a difficult acquisition of mortgage lender Countrywide, and more. BofA has been making tough choices and has taken steps for a turnaround including raising capital, and announcing new fees to boost profits. However, BofA has a huge deposit base and many assets such as the Merrill Lynch division. BofA could see a sharp jump in earnings if housing and the job market improves.
Here are some key points for BAC:
- Current share price: $5.23
- The 52 week range is $5.03 to $15.31
- Earnings estimates for 2011: 1 cent per share
- Earnings estimates for 2012: 98 cents per share
- Annual dividend: 4 cents per share which yields .8%
Citigroup, Inc. (NYSE:C) is a banking and financial services giant. Citigroup has branches worldwide which gives it high potential growth from emerging market countries. It also has less liability with mortgage issues in comparison to other banks, but will still benefit in a housing recovery. Citigroup should be able to move much higher in the long run.
Here are some key points for C:
- Current share price: $26.10
- The 52 week range is $21.40 to $51.50
- Earnings estimates for 2011: $4.08 per share
- Earnings estimates for 2012: $4.44 per share
- Annual dividend: 4 cents per share which yields .2%
Metlife, Inc. (NYSE:MET) provides a wide range of insurance products including: annuities, group life insurance, supplemental life products, individual life insurance products, etc. Not long ago, this stock was regularly trading for $40 per share and looks oversold at only $33 per share. Metlife would see a rise in investment gains with any bull market.
Here are some key points for MET:
- Current share price: $30.41
- The 52 week range is $25.61 to $48.72
- Earnings estimates for 2011: $5.22 per share
- Earnings estimates for 2012: $5.84 per share
- Annual dividend: 74 cents per share which yields 2.5%
Genworth Financial, Inc. (NYSE:GNW) is a leading insurance and financial services company. Genworth has been impacted by losses with mortgage insurance and this will continue to weigh on results, however, the worst might be priced in by now with the stock trading at about 4 times 2012 earnings and for only a fraction of book value, which is around $28. If the housing market recovers, Genworth will see lower mortgage losses.
Here are some key points for GNW:
- Current share price: $6
- The 52 week range is $4.80 to $16.10
- Earnings estimates for 2011: 90 cents per share
- Earnings estimates for 2012: $1.61 per share
- Annual dividend: None
Ford Motor Company (NYSE:F) is a leading automaker, and did not take bailout funds from the U.S. government. This company sells under the Ford, Lincoln, and Mercury brands. Ford shares could rise if the economy recovers, as lower unemployment and more construction could boost demand for cars and trucks.
Here are some key points for F:
- Current share price: $10.66
- The 52 week range is $9.05 to $18.97
- Earnings estimates for 2011: $1.86 per share
- Earnings estimates for 2012: $1.58 per share
- Annual dividend: Ford recently announced a 5 cent per share dividend
General Motors, Inc. (NYSE:GM) is one of the largest automakers in the world. The company and the stock price still seems to suffer from the government aid it received, but over time that may fade. Especially after the government sells all the GM shares it owns. This stock is trading at almost half of the 52 week high and with a price to earnings multiple of about 5, so it is easy to see value in these shares.
Here are some key points for GM:
- Current share price: $20.32
- The 52 week range is $19.05 to $39.48
- Earnings estimates for 2011: $3.93 per share
- Earnings estimates for 2012: $3.80 per share
- Annual dividend: None
Caterpillar, Inc. (NYSE:CAT) is a leading maker of heavy equipment, which includes machinery for agricultural, mining and construction. This stock has come well off of recent highs and now looks like a much better buying opportunity. I would consider this stock on any dips, due to high demand for farm and heavy equipment, which will only rise in an economic recovery.
- Here are some key points for CAT:
- Current share price: $91.63
- The 52 week range is $67.54 to $116.55
- Earnings estimates for 2011: $6.79 per share
- Earnings estimates for 2012: $9.03 per share
- Annual dividend: $1.84 per share which yields 2.1%
Data is sourced from Yahoo Finance.
Disclosure: I am long BAC, GM, F.
Disclaimer: No guarantees or representations are made. Hawkinvest is not a registered investment advisor and does not provide specific investment advice. The information is for informational purposes only. You should always consult a financial advisor.