To the surprise of many...economic news has been improving all of a sudden.....
The reason of a sudden improvement in factory orders & new home sales ..because if you cancel all the orders & purchasing for months...then there is an erosion in prices so much that demands picks up for replenishing the inventory & there are real consumers who need things to consume or BUY on a frequent basis.....
Based on last stat from US...about 92 % are employed and they NEED things & place to live....their buying power has increased with low interest rates & lower prices of everything from House to Electronics....so they are actually better off buying NOW than WAIT for things to pick up when prices will start going UP...
Most consumers have a very good handle on their finance as they have saved in recent months & feel that their job is secure after all the reactionary layoffs.....
Pretty soon we will get good news on hiring once factory orders start coming in .......
Markets are ANTICIPATING improvement in economy going forward......
Technology will be the biggest beneficiary of a demand pick up......chips are needed everywhere from Autos,smart phone,fridges to Big screen TV...
Once the economy start picking up confidence of consumer & producer will soar...so demand will pick up for heavy machinery,Agriculture,Shipping,Iron Ore,Copper etc
Most of the above sectors are trading near bear market lows ...so it will be prudent to stay DIVERSIFIED in many sectors which has been trashed due to economy contracting to the lowest level since depression......
Current market environment gives a unique opportunity to benefit from lowest stock prices since depression......
In my analysis.... we will continue to make HIGHER HIGHS with usual necessary pullbacks for profit taking & news driven events......
I can clearly see that market IS & WANTS to go HIGHER because analyst short agenda of SELL rating is NOT working anymore for several weeks......
What analysts are failing to see that when stock prices are so LOW....their SELL rating has no impact....as market IS predicting IMPROVING business environment which WILL help most companies in a hurry......with improving margins & higher sales.....
Most companies have cut back their expenses to max & are operating very efficiently ...so economy of scale is @ OPTIMUM level......
So...the question IS...how to spot companies which will improve the-most with pickup in economic activity......
I personally check Sales & EPS trend for q/q & y/y and see if the stock is trading far below their growth %....PE is a very good indicator...IF PE is trading @ HALF their SALES/EPS growth rate...you have a SAFE bet.....
This is not a market to take quick profit...it is a "buy & hold" environment.......I know everyone has told everybody that buy & hold is DEAD.....but that IS a CNBC version of investing "trade for 10 cents"....
It will be "hugely profitable in next 2 years" if you buy good companies in a DIVERSIFIED mode & HOLD ......
Some of the companies which I own & looking @..... which are trading @ reasonable PE based on FY 2010 & looking good for future gains are:
RIMM...12.50
POT.....6.94
GNK.....4.43
IPI.......6.85
AGU.....5.55
TSL.....6.42
AAPL...18.11
GOOG..16.60
There are many OTHER stocks which can be analyzed like this and CAN be bought for long term HOLD......
BLOG does NOT give buy or sell.
Saleem
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