Each week, we tap the insight of Sam Stovall, Chief Equity Strategist for S&P Capital IQ, for his perspective on the current market. EQ: In this week’s Sector Watch, you examined the earnings yield of the S&P 500 versus that of the 10-year Treasury bond, and found that stocks are yielding almost three times as much as Treasury bonds right now. How rare is this occurrence? When was the last time that ratio was this high? Stovall: The earnings yield is the inverse of the P/E ratio, meaning that its earnings divided by price rather than price divided by earnings. Right now, the earnings yield on the S&P 500 is 5.4 percent, which is almost three times as high as the 1.9 percent that the 10-year Treasury note is yielding. Going back to 1945, the average multiple is 1.6, as (more)…
May 17, 2013
May 10, 2013
As Sam Sees It: Is This Market Overbought Yet Undervalued?
Each week, we tap the insight of Sam Stovall, Chief Equity Strategist for S&P Capital IQ, for his perspective on the current market. EQ: With the S&P 500 up over 13 percent in just the first four months of 2013, and breaking into new all-time highs on a seemingly daily basis, it’s fair to wonder if stocks are currently overvalued. You tackled that question in this week’s Sector Watch by looking at the S&P 500 from various earnings perspectives. What did you find? Stovall: I found that the market is still trading below its longer-term averages, whether you look to trailing or projected earnings, and whether you look to operating earnings or GAAP (as reported) earnings. Specifically, I found that that S&P 500 is trading at an 11-percent discount to the average projected 12-month P/E on operating earnings since 2000, and (more)…
May 9, 2013
Taking Advantage of Stock Market Seasonality
The stock market has made a lot of noise this week with the Dow Jones Industrial Average climbing above 15,000 for the first time in history. In fact, all of the major averages are up about 18% year to date. There is a general consensus that the massive liquidity operations the Federal Reserve board has implemented are the primary contributor to the market’s rally. However, there are several competing theories as to where the top may be. This week, we’re going to take a look at seasonal tops in the Russell 2000 small cap stock index compared to the S&P 500 large cap index to try and lock in some profits while minimizing downside risk. The Russell 2000 is a stock index made up of small companies with a median market capitalization value of around half a billion dollars. This (more)…
April 25, 2013
As Sam Sees It: The Best Offense is to Stick With Great Defense
Each week, we tap the insight of Sam Stovall, Chief Equity Strategist for S&P Capital IQ, for his perspective on the current market. EQ: The S&P 500 has been up about 16.5 percent since bouncing off the November lows. With May just around the corner, is this party getting ready to die down for investors? Stovall: History would say, “Yes”, but you never really know for sure. Over the last week or so, investors were thinking that we were getting ready to go through some sort of a digestion of gains, but the market just took off this week, again frustrating those bears that are looking for a better entry point. However, we have typically seen stronger-than-average May through October results in years where that period was preceded by positive performances for the S&P 500 in both January and February. So (more)…
April 24, 2013
Small Cap Stocks: Is the Russell 2000 Looking Bearish?
Knowing when to enter a short-biased trade seems to always have a bit more fear and trepidation with it than when on the long side. I know they are just two sides of the same coin. I know that with the right downside strategy (be it option protection or a stop loss setting), there really isn’t any difference between taking a position one way or the other. Oh, I know there are those who believe there is some kind of mystically bad karma associated with betting that the market or a company will move lower so that you can profit from it. That is just silly, of course. But, nonetheless, shorting does carry a bit more risk than being long. After all, in a long position, all you can do is lose everything; if you are short, however, there is (more)…
April 23, 2013
S&P Capital IQ Focus Stock of the Week: A.O. Smith Corporation
S&P Capital IQ Equity Analyst Kevin Kirkeby has a 5-STARS “Strong Buy” recommendation for A.O. Smith Corp. (AOS). For more information, please visit: www.marketscope.com.
April 19, 2013
Real Estate vs. Stocks: Which is Better for Young Investors?
When it comes to investing there are many avenues you can choose to go down, particularly when it comes to first time investors. Two of the most common asset types that investors lean toward are real estate and stocks. In the past, from the average annual returns calculated from 1978 to 2004, the stock market was averaging returns of 13.4 percent compared to the 8.4 percent average annual returns of real estate investments as noted by CNN Money. Obviously, those numbers don’t factor in the most recent effects of the market crash from 2007. According to Standard & Poor’s, the S&P 500 has provided an average annual price return of 3.48 percent over the past five years. For real estate, Zillow.com estimates that an average growth rate of around 3 percent per year is a realistic expectation, depending on inflation. (more)…
April 18, 2013
Stocks Dip Again on Spate of Weak Earnings Reports and Economic News
The Federal Reserve Bank of Philadelphia’s manufacturing index decreased 0.7 in April to 1.3, well below expectations of a rise to 4.0, while the labor department reported that jobless benefit claims rose slightly by 4000. Meanwhile, independent business research association The Conference Board reported its Leading Economic Index that measures U.S. economic growth dropped 0.1 percent in March, in contrast with expectations of a 0.2 percent gain. The concentration of bad news that has accumulated throughout the week and resulting poor performance of stocks and commodities is beginning to confirm predictions of a pullback from the first quarter’s spectacular, and somewhat unprecedented gains. The Dow Jones Industrial Average suffered a loss of 0.56 percent, to 14,537.14, pressured by technology stocks. Hewlett-Packard was down 1.61 percent to $20.16, while International Business Machines dropped 1.17 percent to $207.22 ahead of its much (more)…
6 Bargain Stocks on the S&P 500 That Are as “Cheap” as Apple
On Sept. 21, 2012, Apple’s (AAPL) stock hit an all-time high of $705.07 per share during trading. On Wednesday, almost a full six months later, the stock dropped below $400 during trading-the first time it has been in that territory since December of 2011-before rebounding slightly to close down 5.50 percent at $402.80. Wednesday’s loss is, somewhat speculatively for the moment, being blamed on the assumption that since one of the company’s largest smartphone/tablet audio-chip suppliers, Cirrus Logic (CRUS), announced that it will miss revenue estimates in its upcoming Q1 earnings statement, that Apple’s mobile sales could be on the decline. It will have to wait until next week when Apple reports its own earnings before it can be determined whether or not its supplier’s dismal earnings preview is in any way a reflection of the state of the company’s (more)…
April 17, 2013
6 Blue Chips Moonlighting as Growth StocksOlder Posts »
Blue chip stocks are generally known for being safe investments. A blue chip company has typically been around for years, long enough that it is a household name. It has a market cap in the billions, and its stock price increases, or decreases, at a more gradual pace than growth stocks whose price can fluctuate wildly on even the smallest piece of news. Furthermore, blue chip stocks tend to offer nice healthy dividend yields. Over the last year, however, a number of blue chip stocks have been doubling as or behaving like growth stocks. The following six stocks are all American mega cap companies, whose share prices have gained at least 20 percent over the past 365 days, and whose dividend yields are greater than 2 percent. General Electric Co. (GE) – The energy company’s annual dividend yield is currently (more)…