As we all do everyday, we read the news, listen to the news, watch the news and search the Internet for the news.
From sea to shining sea I hear the noise about how America has failed, will never be the same, is no longer leading the world in anything, and has lost its way.
Stop whining America! Our economy is recovering!
Key sectors have always played a major role in any economic recovery, and this time is no different.
The financial sector drives the economy with personal loans, business loans and mortgages, as well as savings products. As these areas show signs of life, so does the economy.
The first step is for the major banks to break through the issues of liquidity, which all of the quantitative easing, as well as the bank bailouts have done thus far. As much as we might dislike the government assistance, while issues remain, financial institutions are on the mend.
In my opinion, Bank of America (BAC) has done the most to clean its balance sheet to position itself for growth in earnings and revenues. It's ties to Fannie Mae have been severed as I have outlined in a previous article. (Read this) This action alone has shown a decisive strategy for Bank of America to change course and lend through other agency's, albeit at potentially higher rates but far cleaner assets. This is a very positive sign in our recovery.
Consumer spending has risen dramatically and a key indicator is one which shows consumers having the largest percentage increase in debt in the last quarter than at any time in the last 10 years. As this report by Bloomberg shows, (read the report here) all forecasts were topped;
"Credit increased by $17.8 billion to $2.51 trillion, Federal Reserve figures showed today in Washington. The gain topped the $10.5 billion median forecast of economists surveyed by Bloomberg News. In the three months to January, borrowing climbed by the most since mid 2000."
Amazon (NASDAQ:AMZN) has the greatest potential to gain dramatically since it is the largest on line retailer on the globe, and has no other costs than those that are internet related, and can be more competitive price wise than just about any retailer anywhere.
Amazon has a recent total cash position of over $9.5 billion dollars against a total debt of $1.81 billion dollars. Its revenues came in at $48 billion dollars, which is an increase of nearly 35% year over year. Amazon's forward PE ratio has been cut in half as well. These are all very impressive numbers and reflect the growth of Amazon and the return of the consumer.
The assortment they have is nothing short of remarkable, and the reach to the consumers has been dramatic.
The Auto Industry
Big ticket items have surged, led by the auto industry, which had unexpected gains of 16% in sales in February to an annual adjusted "total vehicle sales" number of over 15 million cars.
While this dramatic number might not be maintained throughout the entire year, it clearly shows that spending is back, and the auto industry is leading the way.
Ford (NYSE:F) has positioned itself internationally as well as nationally with its wide assortment of vehicles; from economy cars, to hybrids, to trucks, vans and larger "luxury" sedans. The price ranges fit just about any budget.
They have integrated sync technology to enhance the overall driving experience, even in its economy class autos, and they did not borrow a dime from taxpayers.
While there are claims that China is slowing (as per this report shows), it flies in the face of the global numbers overall of those adjusted annual sales rates of over 15 million vehicles. China could be a wild card, but its overall impact on actual car sales is about 1.39 million vehicles, which if backed out from the current surprise numbers brings the industry right back to its anticipated growth anyway!
Buying shares in these stocks, within these sectors, can help us profit from a recovering economy; Bank of America , Amazon.com , Ford
These stocks can add potentially dramatic capital appreciation as we move ahead, in spite of the gloom and doom crowd, because quite frankly, we are an economy in recovery.
The Macro Trends
We have been adding jobs, real jobs not government "fake" ones. As this article reports we added 216,000 private sector jobs;
"The right part of the economic good news, good data story was the private sector adding 216,000 jobs."
We are spending real money. Not just government handouts, but real money on cars (as this article points out sales jumped 16% in February), computers and gadgets with Apple (AAPL) leading the way with new product offerings noted here (read this) and vacations, according to "Statista", hotel occupancy has risen from 45% to 61%, even through the winter months, which clearly shows that discretionary spending is also on the rise. Finally, on clothing, which always is a key economic indicator, there are increases almost across the board according to "Just-Style" in this in-depth review of all sales.
Yes, we hear from the talking heads and the politicians, and the pundits that gasoline prices are too high (they are), that housing is still holding us back (maybe), and that the geo-political issues are standing in the way of our recovery.
The numbers refute all of it as I have noted in just a brief overview of the links I have added here.
Stocks That Could Reap Gains Now
Ford : Price: $12.24/share, Dividend Yield: 1.7%, ESS Rating: Bullish
In April, 2011, Ford was at roughly $16/share and has not seen that price since. We are heading directly into the busiest time of the year for new car sales (Spring/Summer) and Ford has been on a roll.
A classic turnaround story that brings back memories of Lee Iacocca and Chrysler of 1980, but Ford never took a dime of taxpayer money.
Yes, the last earnings report was skewed by previous losses, but it is still money on the bottom line and with a tiny PE right now I believe this stock can fly. Much has been written about China slowing down and Ford has been big there, so a China slowdown will impact sales. Maybe, but show me the numbers! There are no auto sales decline numbers to support that theory.
Of course it could happen. I will believe it when I see it.
Bank of America : Price: $8.02/share, Dividend Yield: .50%, ESS Rating: Neutral
Bank of America surged 4% yesterday, but of course that is to be expected in a recovering economy; financial stocks WILL lead the way.
Say what you will about Bank of America. They are despised by taxpayers, politicians, and even their customers. That being said they have taken long strides in clearing up the Countrywide mess, cut back on all expenses, and have increased revenues and margins.
They have a very long way to go, but Bank of America is cheap right now in my opinion, and it will not be cheap as the economy continues to recover.
Amazon.com : Price: $183.77/share, Dividend Yield: NA, ESS Rating: Bullish
If retail sales are increasing, what better company to invest in right now other than Amazon? They have everything. What they do not have is just as important; buildings, leases, sales help, cashiers, real estate taxes, plumbing, roofs, air conditioning and energy expenses, etc, etc.
For anyone to casually dismiss these facts are simply living in the past, and Amazon is the NOW and the future of retailing. Internet sales account for 11% of all retail purchases, up from 9% a year ago. Just imagine what that percentage will be if gasoline continues its rise.
When someone wants to buy anything, when they turn on their computers or iPhones and iPads, Amazon is the place they head to first, and more often than not, last.
The USA has plenty of hurdles to leap, but reports of our demise are premature. Actually they are just plain wrong.
With key sectors such as financial, retailing and manufacturing (specifically the auto industry) leading the way, the signs are clear and cannot be dismissed.
The stocks I have outlined within each sector are ones that could gain the most in my opinion. While "a rising tide lifts all boats" it still is a stock pickers market and selecting the right value stocks and growth opportunities could give us the best chance to profit from our recovery.
We are on the road back and in spite of everything that has been thrown our way, we are surviving, digging out, and reshaping our economy and that of the world's. Again.
I want to be part of this revival. Do you?
Disclaimer: Please remember to do your own research prior to making any investment decisions. This article is not a recommendation to buy or sell any securities or stocks, and is the opinion of the author.