At S & P 1100, DJIA 10,280 the market seems at a crossroads – basically flat to slightly lower for 2010. Despite the drumbeat of discouraging media headlines, technically, the recession is over, and our economy is growing again. Earnings are rising nicely, inflation is not an issue, and amazingly, long term interest rates are still low. The stock market is not overvalued by historical standards. However, uncertainty over tax & regulatory policy, mushrooming federal debt, European woes, a gyrating market and high unemployment still bother investors. As such, investor cash on the sidelines – earning almost nothing - remains at historically high levels, and could be the fuel for more advances. Corporate cash on hand, nearly $2 trillion, is the highest in history. That bodes well for investor-friendly actions like mergers, dividend boosts, and stock buy-backs.
As our economy resumes a slow-growth pattern, the market should follow suit, with plenty of setbacks along the way. Our view is that the large cap, dividend paying stocks offer the best value in this environment. These are over weighted in our “six picks’ for 2010 which are easily beating the unmanaged S & P 500 stock index so far this year.*
The six are: Intel (INTC), Johnson & Johnson (JNJ), J.P. Morgan (JPM), McDonalds (MCD), Teva Pharmaceuticals (TEVA), and Vivus (VVUS). We still like all six, especially Vivus, J & J, and Intel.
*through 6/15/2010 – equal $$ invested in each stock.
The 13% market pull-back in our market from the highs set in late April mirrored a similar drop in emerging markets overseas. That is giving investors a chance to invest in economies growing much faster than ours. Vanguard’s Emerging Market Index Fund (VWO, $39) is a good choice in this space.
Most analysts believe the commercial real estate market has bottomed. Consider the preferred B shares of Northstar Realty (NRFPB, $14.50). It yields over 14%, a higher yield than the common shares (NRF), even though preferred shareholders get paid first.
Unsure where or when to invest? Let a professional manage your portfolio. You might see better returns. Contact Bob Mann (invest@firstgeorgetown.com) or 703-519-7700 for a descriptive brochure ($250k account minimum).
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