Where to Invest in the U.S. in 2016 Last week, my colleague John Blank took a great look at foreign markets and what the best (and worst) areas were around the globe from an investing perspective. But what about domestic markets? After all, U.S. markets have been relatively strong performers when compared to foreign shores in 2015. Granted, part of this is thanks to a strong dollar, but there are definitely other factors at play as well. The American consumer remains extremely robust as low gas prices and a great jobs market have given buyers plenty of cash in their pockets for new discretionary purchases. Plus, asset prices (stocks and homes) are surging, making many feel even wealthier which only adds to this positive effect. And finally, the interest rate situation suggests that the American market is quite strong as well. The Fed just raised rates here while foreign central banks—and especially those in Europe and Japan—appear to be moving in the opposite direction if anything, and could move to even looser monetary policies in 2016. Hot Areas Thanks to these trends many investors have moved into areas that will either benefit from a dynamic consumer, or higher interest rates. Undoubtedly these areas focus in on the banking sector and stocks in both the restaurant and retail world. However, while I still like these areas for 2016, I am getting concerned that the trades might be getting a bit crowded right now. So while these could still be solid picks, I also want to highlight a few areas that are a bit further off the radar but could still be great domestic-focused selections in 2016. Overlooked Areas Some segments beyond financials and consumers are trending nicely into 2016 but haven’t really received top billing. Thus, these areas are overlooked and could be better values with more potential heading into the New Year. So check out either of the two sectors highlighted below, as well as a stock an ETF selection in each, for some great investing ideas for 2016 that you may not have considered yet: Cloud Computing We have just begun to see the promise of the cloud computing world as a number of companies that focused on this space were big winners on the year including Amazon and Microsoft. And as more investors begin to understand just how important this business is to the surging technology world, I’d expect even more focus on this area in 2016.
After all, consider just how much the space is projected to grow over the next few years, including that cloud applications will make up nearly 90% of worldwide mobile data by the end of the decade. Software-as-a-service and infrastructure-as-a-service is the real promise though, as software looks to grow at nearly 8.14% compound annual growth rate (CAGR) over the next three years, while infrastructure saw 32% growth for the year and looks to continue that momentum in the tail half of the decade as well with a 19.6% compound annual growth rate. And to top things off, the platform-as-a-service market looks to 36% compound annual growth, growing from just $1.7 billion in 2014 to $68.3 billion in 2026. In other words, the entire cloud market has tremendous potential and we are just at the beginning of this revolution. Cloud Computing ETF (SKYY) A broad way to invest in the cloud computing market is with First Trust’s SKYY. This ETF uses a unique approach to get its component securities by following the ISE Cloud Computing Index and charging investors 60 basis points a year in fees for the exposure. Companies are grouped into one of three segments; pure play (direct providers of the cloud or companies that deliver goods using the cloud), non pure play (focus outside the cloud but still heavy use of the cloud) and tech conglomerates (use the cloud but are massive companies) in order to determine weights. Tech conglomerates are capped at 10% while non pure play receive a percentage equal to their market cap divided by the total market cap of all three types of companies, with pure play receiving the rest. Stocks are weighted equally within each of the groups so we get a pretty spread out product. Software does take the biggest spot at just over one-third of assets, while internet services/software takes the second spot at roughly 20%, followed by communications equipment at 13%. The fund has beaten out the S&P 500 over 2015 but with the solid trends at its back heading into the New Year, this diversified tech ETF with a Zacks ETF Rank #2 (buy) could be one to pick for investors seeking a more domestic focus in the coming year. Salesforce.com (CRM) Salesforce is one of the most important companies in the cloud universe thanks to its customer relationship management software platform (dominating the PaaS market I discussed earlier) which is the backbone for a vast number of companies around the country. CRM is truly a giant in the space as it has become an S&P 500 component and a $50 billion company, making it a large cap play on the cloud. And while shares have been strong in 2015, there is still potential for growth in this name if we look to recent earnings estimate revisions. In just the past month, 10 estimates have gone higher for CRM’s full fiscal year compared to just one lower while the following year has a 9:1 ratio in this regard. And with current year EPS growth expected to be 470%, this is definitely a large cap growth name that has earned its strong position in this industry. But speaking of growth, it is also worth noting that CRM has earned itself a ‘B’ Style Score Grade for Growth as well. While it is certainly due in part to its projected EPS growth, its cash flow growth is also very impressive at 88.8%, while its projected sales growth of over 23 percent thoroughly crushes the industry average of 4 percent making this one of the best ways to play further growth in the cloud computing market.
Defense The defense market is rapidly becoming a big story thanks to the growing threat from ISIS and the terrorist group’s extended reach. That, along with a host of other global issues—Russia comes to mind here—along with a U.S. presidential election looks to keep the defense market in the spotlight for the near term. And while the U.S. looks likely to keep spending levels at an impressive clip, it is really the European Union and Japan that could surprise with more spending in the near term. Japan’s defense ministry has already requested a spending increase as the Japanese-Chinese rivalry intensifies, while many countries in the EU spend a fraction of their budgets on defense when compared to the U.S. Should the ISIS threat remain strong, there is plenty of room for nations like France, Germany, and even the UK to boost their spending (without still even approaching U.S. levels) making the sector one to watch in 2016. Aerospace & Defense ETF (ITA) For a broad play on the sector, iShares’ ITA will be tough to beat. The fund holds about 40 aerospace and defense stocks in its portfolio and charges a reasonable 43 basis points a year in fees. As you might expect it has big holdings in the large cap space though it isn’t too concentrated despite its relatively small basket. Top holdings of Northrop, Raytheon, Lockheed Martin, United Technologies, and Boeing all make up at least 5.8% of the basket each, so it is still relatively spread out.
ITA has edged out the S&P 500 for the YTD time frame, while it has soared past the broad market when looking at a five year look. However, with the broad array of threats and the increased focus on defense, this ETF could continue to be a go to pick for investors seeking diversified exposure in this key area of the economy. Leidos Holdings (LDOS) Leidos isn’t exactly a giant, but it is right at the heart of one of the biggest areas of focus for the defense community; cybersecurity. Additionally, LDOS specializes in border/transportation security, and broad intelligence gathering activities as well, two areas which look to be especially in focus thanks to the threat from ISIS and the presidential election. But beyond defense, LDOS also has expertise in health and engineering making it a pretty well-rounded choice overall. The company has seen rising earnings estimates as of late, including four estimates go higher for the current year compared to zero lower, while the following year looks quite promising too. Both the current year and next fiscal year have actually seen their consensus estimates move higher by over 6% in just the past sixty days, suggesting a pretty nice longer term trend for this stock and enough to help LDOS to a Zacks Rank #1 (Strong Buy).
LDOS also has great metrics when it comes to its Style Scores as LDOS has a Growth Score of ‘A’ and a Value Score of ‘B’. The growth is thanks to its industry-crushing cash flow growth of over 277%, while its ROE is in line with the industry at 21.08%. Meanwhile it also has great value characteristics including a very strong cash flow per share, and a Price to Sales ratio of 0.8, making this a stock that you definitely want to look at for the New Year. Happy Investing!
A lot of people are rotating into the dow dogs of this year. I bought ETN yesterday on that theory and should have purchased ATI given their bounce today. Both solid balance sheets with good dividends and undervalued to themselves. CMI another example
Post by Gene Editing on Jul 29, 2016 3:46:47 GMT -6
still holding lotto play CYCC for phase3 AML readout subgroups trading at cash no value for pipeline no value for pahse3 readout ... NO i repeat no DEPT !!! (LOL) if seen something positive look for a CPXX like move just imho
I just finished closing out July and thought I'd provide some ideas here to start a dialog of how to use this forum going forward: My investing approach is separated into two accounts:
Lower risk yield-based portfolio This account has been pretty steady all year with very little of the volatility of the market. Currently has 20% cash because my covered call strategy had 2 stocks assigned yesterday. Current stocks: ABT AMGN BX CSCO DOW EQCPRD EVEP LOW M MO MRK PFE VZ Current covered calls: ABT VZ both in the money for Aug/Oct Portfolio current yield 3.0% YTD up 10.6%. (Q1 1.6% Q2 3.5% Jul 5.2%)
Trading portfolio Mixture of spec, yield and growth stocks. Currently has 10% cash Account has been very volatile for past 2 yrs from energy and bio/growth stocks. Portfolio current yield 2% YTD up 4.1% (Q1 -5.5% Q2 -8.6% Jul 20.6%)
Current stock holdings and july % which shows me why I stay invested and try not to time too much: ABBV 10.9% AHT 11.0% ALK 15.3% ARCC 6.6% BIIB 19.9% BLUE 32.1% BX 9.4% BXMT 4.8% CLDX 5.2% CMTL 1.8% EPD (2.7%) FB (1.1%) sold old position. New after earnings GILD (4.7%) ILMN 18.5% JBLU 10.7% KMI 8.6% LAD 21.4% MPC 3.8% MSFT 10.8% NXPI 7.3% SQNM 158.3% SWKS 4.3% WFC 1.4% WYY 3.4% ZIOP (11.5%)
Current covered calls: BIIB ILMN MPC Current cash covered put: RAI Current long put: DLR
I track about 200 stocks for potential adds. Current target list: CMI DIS GE HON IP JPM LH PAAS TWX VIAB. None are at my target price and they change daily. Currently looking to add yield. Bios are at inflection point but next week many are reporting so I'm waiting to see what the week brings. Just had CELG assigned but will look to add soon. Some speculative bio targets incl ACAD ALDR ANIP FMI GHDX HRTX JUNO KITE PETX SGEN.
Love to get new ideas so hope others add potential target stocks. My market view is that we are in for a continuation rally based upon the confirmation of 2H growth and the large improvement in revenue beats in Q2, but that Aug is due for a pullback. Too many going on vacation and looking for safety while out and we are likely to see some new discussion of fed rate increase in sept.
Note today FactSet graph. Commentary in Macro Trends folder:
One of the things I try to do each quarter is to determine how analysts react to the quarter with their next qtr guidance. This is a Yahoo screen which doesn't include all analysts and is less reliable than I'd like but a few notables in my investments (last 30 days): ABBV 5 inc/2 dec in past 30 days. Minor ALK 0 inc/4 dec 7.6% eps dec Q3 BIIB 20 inc/0 dec 6.5% inc FB 37 in/0 decr 10.3% inc ILMN 13/4 2.2% inc KMI 3/1 (6.3%) Not sure how? MPC 4/6 (40.6%). Refiners were hammered by crude prices. Might have to revisit invest
Under: DIS finally getting some traction.?
Dec 14, 2017 17:08:45 GMT -6
martyc: I took an entry level position in DIS. Will add eventually to overweight when it becomes clearer that the deal will go thru. Can't believe how well positioned they will be. 60% Hulu. 20% of content watched on NFLX they can pull. More in thread
Dec 14, 2017 11:05:16 GMT -6
Under: Great posts on $DIS
Dec 13, 2017 17:50:49 GMT -6
Under: $ROKU Citron on a war path.
Nov 28, 2017 15:11:20 GMT -6
Under: $HAS takeover bid for $MAT?
Nov 10, 2017 16:16:07 GMT -6
martyc: Not looking like the market will provide any discounted opp for SGMO. Call was just too professional and all signs indicate they are on a great path for commercialization. Happy with core but wish I had some trading shs
Nov 10, 2017 9:04:05 GMT -6
martyc: For anyone looking to find an entry point into SGMO, I'm almost hoping is sells off in next few days so I can add more. They are really clicking but the fact they haven't signed new deals might cause some to exit. Watching as I have room for trading shs
Nov 9, 2017 18:28:09 GMT -6
martyc: Been an interesting ride so far. I figured the Bears would be about this good but hoped the O wouldn't look so lame. Another building yr but still possible to get to 8-8 IMO
Nov 9, 2017 18:26:08 GMT -6
Under: whats up with your Bears this year Marty?
Nov 9, 2017 17:35:25 GMT -6
martyc: Hope you were long ROKU. I wanted to see Q first so missed out
Nov 9, 2017 7:08:53 GMT -6