(Editor’s Note: Matt Towery’s new book Newsvesting: Use News and Opinion to Grow Your Personal Wealth™ goes on sale October 15. Neal Boortz describes it as “brilliant.” John Fund calls it a “valuable guide to avoiding surprises and capitalizing on opportunities.” Economist John Mauldin says it is “a journey into a very new way of dealing with the vast information deluge…” Here is his latest Newsvesting™ update as we prepare for the book’s debut).
Now that the market has taken the spill that our analysis of public survey data suggested (see my Creators Syndicate article of April 23, 2015 http://www.newsmax.com/MattTowery/Opinion-Savvy-research-Economy/2015/04/23/id/640284/ ) it’s time for Newsvestors™ who took their gains in May, June, and July to evaluate when and how to enter a volatile and shaken stock market.
The oil glut and strong dollar have combined with instability in foreign markets to bring the Dow down from a July high of 18,312 to Friday’s close of 16,472 (and that was an up day!). The S&P was at a high of 2131 in July and it closed Friday up, but still at 1,951. And it isn’t just oil and the dollar that is to blame for this dismal last quarter. Tech companies like Apple have seen their shares drop, in part due to glitches in new products or upgrades.
Those who have ridden the oil crisis and invested in companies such as ConocoPhillips (COP) have been rewarded as of late. COP fell all the way down to the $42 range in August but came roaring back to slightly over $51 by last Friday. Supply reports will continue to provide conflicting views in the months to come, so the stock could tumble back down to the low 40s or even lower if one follows projections by some analysts. But most experts have decided that ConocoPhillips will undoubtedly emerge from the oil glut a big winner, as have been those who have been Newsvesting™ in its lows and selling to enjoy seven or eight dollar gains, only to reinvest on later dips.
Oil has been an obvious topic and has dominated much of our Newsvesting™ attention this year. But plenty of other news has captured the attention of Newsvestors™. The other predominate issue being the endless belief that the Fed would raise rates and that financial stocks would finally start to rise. But those who follow Newsvesting™ and our steadfast devotion to the Atlanta Fed’s so-called “Nowcast” of the GDP were pretty sure that a rate hike was unlikely in September. Now with new job creation and manufacturing order reports moving in the wrong direction, Wall Street once again believes it has dodged a rate hike until perhaps early next year.
Dip your financial toe in the water
As a result, the financials such as Bank of America (BAC) and Wells Fargo (WFC), as well as related companies such as Prudential (PRU) and MetLife (MET), have also been hammered in recent months. While there could be more pain for these companies, it might be time to dip the financial toe in the water. With some analysts describe the current slide in the market as simple “soft and patchy” spot of a likely continued strong bull run, others suggest that deflation in Europe and sluggishness at home might mean a recession in 2016.
This isn’t a bad time to take some of that cash those who follow Newsvesting™ brought in with smart sell orders in the early summer, and start setting the stage for a comeback—even if the comeback means more pain over a prolonged period. We remember Warren Buffett’s admonition to “buy when others are selling.”
One stock this Newsvestor™ was buying, when the analysts were saying it had reached its peak, is Altria (MO). As mentioned before, Altria does best when the dollar is strong, since its products are sold in the U.S. and are not vulnerable to lost revenues abroad. And its yield of over 4% is hard to beat. Its “sibling” Philip Morris International (PM) has lost some of its luster on the weakness of foreign
economies and strength of the dollar. Its yield is now over 5% and a good opportunity to buy shares might be coming up as analysts wait to see if the Obama administration gets its way on the proposed Pacific Trade Agreement (which would insert language designed to strip tobacco companies of protection they have from heavy regulation of ads, warnings, etc.) or if Republicans can force the agreement to be altered. http://www.washingtonpost.com/news/wonkblog/wp/2015/10/02/democrats-got-one-big-thing-from-the-almost-finished-trans-pacific-partnership/
There is a thin margin to pass the agreement and GOP members are threatening to kill it off without a change. PM might be a nice addition to have at this lower price, regardless of how the agreement turns. Even if the agreement remains as it is currently proposed, many years of historical prices suggest that efforts to kill off the tobacco industry have not hurt the big companies.
Investing in healthcare is smart
If “health” is a concern with the tobacco stocks, Newsvesting™ in healthcare remains a good play. We’ve been hot on Aetna (AET) and remain so. Analysts have what we believe to be a far too ambitious price target for the stock, but buying bits and pieces on bad market days remains our strategy. Let’s add to that mix Johnson & Johnson (JNJ). It is a broad healthcare product company, not as fickle as the pharmaceuticals, and has over a 3% yield.
Then there is the debt ceiling issue. We just learned in the last few days that Congress has just until early November to raise the federal government’s borrowing limit or, once again, those checks will allegedly start bouncing! Speaker John Boehner has stated that he will get a fix in place before he exits the job at the end of the month. But his likely replacement, Rep. Kevin McCarthy hurt himself with conservative members of his GOP conference when he appeared to put down the committee work related to the Benghazi investigation. While these things always get worked out, and government shutdowns usually have little impact on the markets, those associated with a potential wrangling to raise the debt ceiling can have a huge impact, such as in 2011. The big hit back then was a downgrade of the credit rating of the U.S. That hit markets hard and is less likely this time.
Still, expect turbulence all the way to December when a final solution must be in place. Wall Street usually overacts to matters of politics. That could give Newsvestors™ a great dip in which to buy something like the S&P index (SPY)– a dive into good stocks that might drift downward should a “crisis” emerge.
DISCLAIMER: Hey, I’m no genius and certainly not a licensed professional in the area of investment services. Don’t rely on what I say. This is in no way professional investment advice. Like my pal Neal Boortz used to say, find out about these things on your own! But Newsvesting™ works for me and you can read how to Newsves™t as soon as the book is available on October 15th!
