This week’s economic numbers were a bit soft. GDP rose only .4% in the latest quarter. Jobless claims rose to 357,000, up from 341,000 the previous week. The Conference Board’s index of consumer confidence slipped in March to 59.7, down from 68.0 in February. But the S & P Stock Index reached an all time high, closing at 1569.19. Talk is rampant about a market top. In the background, however, the US Federal Reserve has continued purchasing $85 billion in treasuries and mortgage backed securities. Investors seem confident that as long as the Fed continues to stimulate the economy that buying stocks is the right thing to do.
The question is: “Should I invest now? I missed this bull market so far. Most likely the answer is yes. There will be ups and downs, gloom and doom nay Sayers, and every variety of opinion in between. Generally, though, it is a time to be cautiously optimistic. Personal income rose 1.1% in February and spending rose .7%.
The next obvious question is where should I look to find the best investment plays? Here are some tips:
While the consumer is spending more, the dollars being spent are for basics such as food, clothing and energy. With this in mind, one sector to look at would be the discount retailers. The three that come to mind are Dollar General (DG), Dollar Tree (DLTR) and Walmart (WMT).
For Dollar General revenue is up 8% and projections are from it to increase 10-12%. The stock is selling at $50.38
Dollar Tree is up 2.4%. It plans a big expansion, adding 635 stores and relocating and remodeling 550 stores. The Stock is selling at $48.43.
Walmart has begun an aggressive discounting program with some items priced under $1.00. Same store sales are up 1.2%. The stock is selling for $74,83.
Another source of information for today’s market is Value Line. They published their picks for 2013. They are citing the following five stocks:
General Mills, with name brands like Cheerios, Yoplait and Hagen Dazs, Clorox with dividend payout of 3.17%, Proctor and Gamble, dividend of 3.2%, McDonalds, dividend at 3.34% and Microsoft.
Still another way of picking the best stocks is to follow the big money, such as billionaire John Paulsen. He is investing in large multi-nationals such as United Technologies at $93.43 and Caterpillar at $86,97
Notice in these advisories, the theme is to stay with where the money is being spent and where the big profits are coming from. Don’t’ try to pick some exotic concept stock. Yes, some will do well, but in today’s economy it’s best to stay with the consumer. Remember that the consumer accounts for 70% of GDP,
People are eating out more. Take a look at a restaurant stock like Darden, (DRI). They own Olive Garden, Long Horn Steakhouse and Red Lobster. The stock is selling at $51.68
For those who want to venture away from the consumer, you could look at the bank stocks. They still have a long way to go before reaching new highs.
There will be ups and downs this year. Notice also, that the stocks mentioned above will be able to weather the swings in the market averages.