CHICAGO, Jan. 14, 2011 /PRNewswire/ -- Zacks.com Analyst
Blog features: Boston Beer (NYSE: SAM),
InterActiveCorp. (Nasdaq: IACI), Oracle (Nasdaq:
ORCL), Smurfit Stone (NYSE: SSCC) and Vivo
Participacoes (NYSE: VIV).
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Here are highlights from Thursday's Analyst Blog:
Those Calling for a Market Correction Make Me
Laugh
After stocks ended 2010 making new highs, many experts have been
calling for a healthy correction before putting more money into
equities. And if you had listened to those folks you would have
missed out on even more gains in the opening days of the New
Year.
There are 2 main camps of folks that are calling (nay,
praying) for this correction. Let me share with you their
sad stories and why you should continue to pass on their faulty
strategies.
Correction Camp #1: Missed the Party All Along
In 2008 it was easy (and 100% sane) to be a bearish investor as
most signs looked like we were headed towards a second Great
Depression. Even through most of 2009, when stocks rebounded, it
was hard to fully embrace the turnaround story while economic booby
traps seemed around every corner.
However, by the latter half of 2010 the clarity of the economic
rebound story should have been obvious to all. But not all embraced
this notion because their egos were so fully invested in being
members of the bearish camp.
These double-dippers and doomsayers have already missed out on
the lion's share of the easy gains to be made from this rebound. So
they need to invent reasons to get back in that allow them to save
some face. And that reason is the "great correction." Unfortunately
for them, that correction keeps not coming. And they continue to
miss out.
When will they learn? When they stop joining bullish or bearish
camps and simply become investors who weigh the evidence at hand to
make more clear headed decisions.
Correction Camp #2: Technicians
The market has rallied about 20% from the lows of the summer.
And that has been a steady and smooth ride with virtually no
substantial pullback. Technical investors read this as being an
overbought rally given the length and strength of the move.
However, this one-sided form of analysis is missing the entire
fundamental reason for the market to go higher. The short answer is
that corporate earnings are on the rise. Better yet, they are
exceeding estimates. And better yet, the P/E of the market going
forward is only about 13.2 versus 14-15 historical average.
The reality is that the market had the "big correction" back in
the summer when too many folks succumbed to double-dip fever. That
swoon had stocks way too oversold. So the move up to this point was
more of a reflexive rise back to sanity, which still leaves room
for more upside.
This is something that technical investors would miss when just
looking at their charts. Fundamental investors have been better at
reading the tea leaves on the move...and gladly there seems plenty
of more upside on the move.
Last Thought on the Big Correction That Isn't Coming
So even though earlier on I took some cheap shots at the
double-dippers, it's not to say that their concerns are without
merit. There are many potential hazards down the road. But that's
the key...they are down the road.
So in the meantime the economy is rebounding. Corporate profits
are at record highs. And stocks are reasonably valued in that
light. So for now, it's most profitable riding these bullish
signals. Yet we should keep a watchful eye on the potential
pitfalls out there. If and when the odds increase of them coming to
life, that is the time to make adjustments. And that time is not
now.
Take 5
This is where I share 5 of my favorite stocks that all have a
coveted Zacks #1 Rank (Strong Buys).
1) Boston Beer (NYSE: SAM): This is a very well run
company with a highly respected brand. Not surprisingly they keep
growing profits at a healthy clip with more share price gains
likely on tap.
2) InterActiveCorp. (Nasdaq: IACI): Ad spending is on the
rise. And online ad spending is the healthiest group of them all.
IACI is well positioned to benefit. Their $1
billion in cash on hand is also a head turner for
investors.
3) Oracle (Nasdaq: ORCL): Their recent earnings report
showed great strength. Couple that with Intel's earnings tonight
and you see that tech is alive and well. Oracle is one of the
better large-cap choices in the group.
4) Smurfit Stone (NYSE: SSCC): A rebounding US economy
means more products are being purchased...which means more products
are being packaged and shipped...which means packaging companies
like SSCC are in line to profit from this clear trend.
5) Vivo Participacoes (NYSE: VIV): Hot emerging market in
Brazil meets hot emerging industry
of mobile phones. Do I really need to say more?
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