CHICAGO, Jan. 28, 2011 /PRNewswire/ -- Zacks.com Analyst
Blog features: ADTRAN (Nasdaq: ADTN), Bed Bath &
Beyond (Nasdaq: BBBY), Fairchild Semiconductor (NYSE:
FCS), Halliburton (NYSE: HAL) and Korn/Ferry (NYSE:
KFY).
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Here are highlights from Thursday's Analyst Blog:
Tussle with 12,000 – What's Next?
We officially touched Dow 12,000 on Wednesday before a mild
retreat at day's end. Helping the cause was President Obama's "tack
to the center" speech talking about business-friendly initiatives
to spark more job growth. Combine that with more quality earnings
reports and the Fed keeping its foot on the QE gas pedal and you
understand why we are marking new highs.
The trick at this point is how we get above this key level. If
Q4 GDP on Friday is markedly above the 3.5% consensus, then we will
blast right on through. If not, then we will flit above and below
12,000 a little while longer. What some might call a consolidation
period. This will help us build up strength for a meaningful move
above.
I know some of you traders may read the paragraph above and
consider taking some profits at this stage if a consolidation
period is in the offing. However, I warn you guys against getting
too cute right now trying to time the market -- you don't want too
much money on the sidelines when this ship sets sail.
I also know that many people are concerned that the market is
too high after a 20% rally from the lows of late August. Here is a
quick rundown of the reasons the market can continue to press
higher at this time without a meaningful correction:
1) Corporate Earnings at Peak Levels: Early
reports from Q4 earning season shows corporate America continuing
to sparkle with most exceeding the consensus and giving higher
guidance for the future.
2) Valuation: Forward looking P/E for S&P 500
still only at 13.5, with historical norms more like 14-15. Plus
earnings yield still an attractive 7.3% versus half that for the
10-year bond.
3) Bond Rally Over: The 30-year bond rally
ended in mid-October 2010. Some
active investors already took notice moving money from bonds into
stocks. More passive investors still haven't fully woken up to this
fact. When they see another quarterly portfolio statement or two
showing more red in their bond funds they will catch wise. This
will lead to more money flowing into the stock market.
4) Individual Investors Not Fully on Board
Yet: We've all heard about the investing psychology pendulum
that shifts from fear to greed. The losses of 2008 and the
volatility of 2009 and 2010 still has many individual investors on
the sidelines. As they read more headlines of stocks making new
highs and hear of more of their friends making money, then the
pendulum will start moving back towards greed. This momentum phase
of the rally has not yet begun. When it does, then stocks will race
even higher than they are now.
Long story short, 12,000 is not going to be the peak of this
bull rally. So best you be plenty long in the stock market now to
enjoy more gains in the months ahead.
Take 5
This is where I share 5 of my favorite stocks that all have a
coveted Zacks #1 Rank (Strong Buys):
1) ADTRAN (Nasdaq: ADTN): Nice earnings beat this quarter
has analysts moving estimates significantly higher for 2011. Note
that they have averaged an 18% surprise the last 4 quarters. So
probably there is more good news in store for investors.
2) Bed Bath & Beyond (Nasdaq: BBBY): 2010 was a nice
year of growth for this retailer. Now imagine how well they will do
as the employment picture starts to improve and the consumer starts
flexing his or her muscles.
3) Fairchild Semiconductor (NYSE: FCS): One thing is
clear this earnings season…tech is alive and kicking. This bodes
well for most players in the semiconductor field, and FCS is seeing
their fair share of this growth.
4) Halliburton (NYSE: HAL): With oil prices pressing new
highs, it's not surprising that oil drilling is on the rise. HAL is
a direct winner on this front as can be seen by their fresh
earnings beat which will have more money flowing into shares.
5) Korn/Ferry (NYSE: KFY): This leading executive
recruitment firm was already seeing improved business growth in
2010. Analysts see that growth accelerating in the future as the US
employment picture brightens.
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