These Stocks May Have Enough Steam Left For 2011March 7 | Posted by Kevin Monaghan | Top Story
The recent stock market rally appears as if it may be running out of steam. Or is it? After spending most of the last 6 months in “overbought” territory, the economic recovery however still seems to be well underway. Unfortunately, there are enough headwinds in place to make investors feel a little worried about making a move this late in the game. Turmoil in the Middle East, rising oil prices, and inflation now pose a threat to derail the recovery that’s been leading the markets higher. There is now even more of a possibility that we may start to see the markets pullback or level off.
With savings accounts returning virtually nothing and bonds facing the possibility of rising interest rates (a bad thing for bonds), investors are forced to seek returns by turning to equities. But now that the markets have moved higher, it makes it even tougher to pick stocks that still have upside potential. You hear a lot of investors rotating money into financials, technology, or pharmaceuticals because these sectors have not really participated in the recent market rally. Stocks like Bristol-Myers Squibb (BMY), Intel (INTC), or JP Morgan (JPM) are all examples of this.
After screening a wide range of stocks for further upside potential, we decided to share a few that we feel may have plenty of steam left to move higher throughout the rest of 2011.
Manulife Financial Corporation (MFC)- $18.88. We first started writing about Manulife in October and the value it represented then. Shares were trading at $12.61 then, and today are trading near $19.00. The company will continue to benefit from the market rally. The higher the markets head, the easier and cheaper it is for them to decrease their exposure to their annuity business. In addition, the company should continue to see growth from overseas. Manulife has built a good reputation in many Asian countries and should continue to see double digit growth from the region. Prudential Financial (PRU) is another company we like and they are in a very similar situation. A rise in interest rates would be another catalyst that could move these stocks higher.
See our previous posts on Manulife:
Brookfield Infrastructure Partners LP (BIP)- $23.02. We came across this small cap company while searching through stocks with above average dividend yields. Investors are attracted to BIP because of its strong cash flow, and with a dividend of 4.93%, we couldn’t help to conduct further research to see if this stock would be worthy of picking up a few shares. The company has infrastructure in gas lines, timber, toll roads, utilities, railroads, shipping terminals, and more. Much of its revenue is derived from regulated industries or long term contracts. Although we have no position in BIP today, we will be adding it to our Radar Stock Watch in order to keep an eye on it. A high yielding dividend and strong cash flow could have investors allocating money to stocks like BIP, especially if the markets level out and start trading within a range.
Citi (C)- $4.54. Citi has pulled back about 10% from its recent high and now might be a good time to think about adding some shares to your portfolio. It can’t be ignored that banks are pulling out all the tricks to generate cash. Monthly account fees for low balances, higher ATM fees, lower credit card benefits, combined with the fact that spreads are in the banks favor, are all giving these institutions the ability to recapitalize after they abruptly realized in 2008-2009 how much they overextended credit. Citi is a stock that we like as a bank play. It’s a relatively cheap way to get exposure to banks, and in our opinion, Citi has the capability of doubling within 2-3 years, especially if the recovery and unemployment continue to improve.
Before making any investment decisions, you should always consult an advisor to make sure the investments are suitable for you and your situation.
Disclosure: Author, Kevin D. Monaghan, Senior Partner at Elite Investment Group has no positions mentioned in the article.