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  • Choppy Trading Action Here to Stay —It’s an Index Trader’s Paradise

    Posted on August 16th, 2011 Profit Confidential No comments

    By Mitchell Clark, B.Comm.

    Investors really want to be buyers of stock at this time, but there isn’t much of a catalyst to do so. Institutional investors are buying, but they’re also playing on the market’s volatility, accentuating the results. Reality is beginning to set in now and there’s a realization that corporate earnings are actually going to be strong in the bottom half of the year.

    I think investors really want to be buyers of stock at this time, but there isn’t much of a catalyst to do so. Institutional investors are buying, but they’re also playing on the market’s volatility, accentuating the results. Reality is beginning to set in now and there’s a realization that corporate earnings are actually going to be strong in the bottom half of the year. The employment situation isn’t great and neither is the real estate market, but the corporate economy is well-positioned to deliver solid earnings growth and this makes the current stock market look very reasonably priced.

    Big, long-term investors relish the opportunity to buy stocks when the indices convulse on the news of the day. Whether it’s adding to existing positions or taking on new opportunities, institutional investors (and insiders) are buying blue-chip stocks in this market.

    There’s been a lot of bad news lately that’s taken a toll on investor sentiment, but I view the reduced expectations for the economy as now being built in to current share prices. The big, remaining investment risk has to do with the sovereign debt issue inEuropeand the potential for a cascading run on banks in European countries. Because of this very real and serious investment risk, there continues to be an attitude of wariness about the domestic equity market.

    Along with the S&P 500 Index, a lot of large-cap stocks that were the market’s leaders have crossed their moving averages on the downside. Technically, the argument for a rising stock market holds very little water. The only good news is that the stock market isn’t overvalued. Because of strong earnings and a reasonable valuation, the market is actually holding up quite well.

    What everyone wants to know is what the future holds for the economy and stocks and it’s fair to say that the question is unanswerable. In my mind, the case for the bulls and the bears is about even. We could go into recession again. The stock market could go down some more. Or, the interest rates that are artificially low might finally produce the catalyst for the economy to accelerate in the fourth quarter, and so might the stock market. This is why a lot of individual investors are sitting on the sidelines; there isn’t much in the way of definitive economic analysis to take any bold, new action in this market.

    What I know is that investment risk for equities remains very high at this time. Large-cap, higher-dividend-paying stocks should outperform small-cap stocks and micro-cap stocks. Gold shares remain the most attractive for equity speculators.

    In a market without any defined trend, the news of the day makes the trading action. Expect more choppy trading action in the weeks to come. Pronounced stock market volatility is here to stay for a while.

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  • The Dow, S&P 500 & NASDAQ: Why It’s Time to Ignore Them

    Posted on July 15th, 2011 Profit Confidential No comments

    By Mitchell Clark, B.Comm.

    Why It’s Time to Ignore the Dow, S&P 500 and NASDAQ indices.Everyone knows that the stock market likes to bet on the future. It’s possible we’ll get a very good second-quarter earnings season without much change in the main stock market indices. This is a market that’s just plain unsure of itself.

    Sentiment would improve if the sovereign debt issue were more under control. This is an issue that must be addressed, because global capital markets will no longer let it ride. Accordingly, we could be in for a slow growth period for quite a few years. Institutional investors have this view and it certainly is tempering the desire to buy stocks.

    The key index that I follow is the Dow Jones Transportation Average. This index made a solid recovery after tempting the 5,000 mark. It’s trading right around an all-time high and has shown amazing consistency in its performance since the market low in early 2009. We’re about to get the numbers from the big railroad companies and this will be an important indicator for investors. Railroad stocks were some of the best-performing stocks over the last year. Since May, they’ve mostly been in consolidation mode, as sentiment in the broader market weakened. In previous earnings reports, the railroad companies were quite positive about load factors, freight pricing and future demand. If these stocks are to accelerate from current levels, they will have to beat current guidance going into 2012.

    We’ve seen quite a bit of yield buying lately, as investors have been migrating towards higher-dividend-paying stocks in order to generate some more consistent returns. This is a trend that is likely to stay with us due to the fact that the economy isn’t generating the kind of growth that everyone wants. With this in mind, the Dow Jones Industrial Average (Dow) should keep outperforming.

    Currently, the Dow is trading right around the same level it was in early 2007. Its all-time high was set towards the end of the same year, then the index was sliced in half due to the mortgage meltdown. When I look at the Dow’s charts over different time periods, I’m struck with the expectation of total mediocrity going forward. Somehow, the index looks like it’s trying to balance itself out after only a few periods of major wealth creation. From 1995 to 2000, the Dow basically appreciated to 12,000 from the 4,000 level. That’s an incredible gain for large-cap companies in such a short period of time. Then, the Dow just drifted for the next seven years before breaking past the 12,000 level again in 2007.

    Ignoring the spectacular ups and downs, the Dow is currently trading at the same level it was 12 years ago. Without dividends, an investor in that index would have lost money due to the rate of inflation. The lesson I suppose is that stock market indices are only a guide and they garner far too much attention. Lots of large-cap stocks beat the Dow’s performance over the last 12 years. In the end, it’s individual stock selection that counts. A major stock market index is more an indicator of investor sentiment than anything else.

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    This stock is up 232% since we first picked it. Our expert analysts say it will go up another 100% in the next 12 months! Our top 19 stock picks were up an average of 173.57% in 2010 (not a misprint). See where we are making money in 2011 and get our combined 100 years of investing experience working for you starting today.

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  • Think Large-cap Stocks Not Worth Your Time? Check Out These Three Winners

    Posted on June 10th, 2011 Profit Confidential No comments

    By Mitchell Clark, B.Comm.

    In a period of slow economic growth, dividends from equity investments are a big deal. In fact, dividends might be the single most important contributor to equity returns over the next several years. Mitchell gives you three examples of the type of large-cap dividend-paying stocks you should be looking at right now.In a period of slow economic growth, dividends from equity investments are a big deal. In fact, dividends might be the single most important contributor to equity returns over the next several years.

    Recently in this column, I wrote about PepsiCo, Inc. (NYSE/PEP) and its excellent long-term track record of wealth creation for shareholders. It takes courage to make a long-term investment in a company. Everyone wants a quick buck from the stock market, but few want to make a real commitment to an investment that might not do much for considerable lengths of time. However, owning the right dividend-paying stocks can prove to be highly profitable and let you sleep comfortably. From my perspective, this combination is really worth it.

    Consider ConocoPhillips (NYSE/COP), which is the third largest integrated energy company in the U.S. This stock is down about 10 points from its recent price high due to the recent correction in the price of oil. But, the stock is up approximately 40% since last year, and that’s not including a dividend payment of around five percent. In my book, that’s an amazing investment return from a $100-billion company.

    Turning to pharmaceuticals, a company like GlaxoSmithKline (NYSE/GSK) is worth just slightly more than COP and offers a bigger yield. However, this large-cap British company has managed to appreciate just over 25% on the stock market over the last 12 months, not including dividends. By any measure, that’s a solid rate of return from an equity security. And, while the financial markets worried about growth rates and sovereign debt issues, this company just kept on making money for shareholders.

    Looking at another industry, there’s Automatic Data Processing, Inc. (NYSE/ADP), which has been in the news a lot lately because of its employment surveys. This company is one of the world’s biggest payroll and human resources administrators. What it says about its business directly relates to the job situation in the U.S. market. Pull up a one-year stock chart on ADP and you’ll notice a nice, solid uptrend in the share price. It’s nothing spectacular, but it has steadily appreciated from the $40.00-per-share level last year to its current value around $53.00 per share. That’s a 33% rate of return, not including dividends, from a company that sells payroll services in a high unemployment environment. In my book, this is an impressive performance.

    Like most stocks, large-cap dividend-paying companies have a tendency to appreciate on the stock market in spurts. I love seeing stock charts like ADP’s, but that’s more of a rarity. This is why owning a basket of the right dividend-paying securities can produce above average-investment returns with a much lower risk profile than from the speculative end of the market.

    I think blue-chip investing has gotten a bad rap over the last few years. Everyone wants immediate gratification from stocks, but the market doesn’t work that way because business doesn’t work that way. In a slow growth environment, large-cap dividend-paying stocks make a lot of sense. They aren’t as exciting, but that doesn’t really matter if you’re making money.

    Retire on This One Hot Stock!

    This stock is up 232% since we first picked it. Our expert analysts say it will go up another 100% in the next 12 months! Our top 19 stock picks were up an average of 173.57% in 2010 (not a misprint). See where we are making money in 2011 and get our combined 100 years of investing experience working for you starting today.

    Get your FREE report on our top stock pick immediately here.

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  • The Industrial Economy & the Retail Economy: Two Different Worlds

    Posted on June 2nd, 2011 Profit Confidential No comments

    By Mitchell Clark, B.Comm.

    The economic news lately hasn’t been very good and it’s a signal that a good portion of the economy isn’t growing very much at all. There are some sectors with good fundamentals and large companies that are able to increase their prices without affecting demand. But, at the consumer level (employment, retail and housing prices), the picture is much different. At the industrial level, the recovery continues. At the retail level, stagnation remains.If the economic data don’t start improving, then even the best-managed companies are going to have a difficult time growing their earnings in future quarters. It’s a fine line the economy is on right now and the future is rather unclear. That’s why the main stock market indices aren’t doing anything; there just isn’t enough positive economic news for a meaningful upside trend to develop. This is why we’ve been seeing institutional investors buying dividend-paying stocks lately. There’s nowhere else to generate any return on investment.

    By the end of the third quarter this year, we’ll know whether the economy’s going to slip back into recession. It may not happen technically, but gross domestic product (GDP) could drop to one percent on an annualized basis, which is pretty darned slow. We could even get a period of slow economic growth for the next several years, as the global economy deals with high levels of government debt and spending, combined with a slow recovery in the housing market. In a way, you could argue that the Federal Reserve has done a good job of “managing” the U.S. economy in that the recent recession could have been a lot worse. Going forward, there isn’t much in the way of policy tools left to stimulate the economy. The private sector is on its own (as it should be).

    Stock market advice in this environment is less useful with the broader market in consolidation. Long-term equity investors can buy large-cap stocks with solid dividends. Speculators will have a much more difficult time generating capital gains without the help of a rising market. I still view the current environment as being a bear market for stocks. That’s why investing in gold is such a good idea. The spot price moves opposite the U.S. dollar and, for a lot of institutional investors, gold is becoming somewhat of a currency itself. This is especially the case with all the sovereign debt troubles in Europe. If the euro currency were to come apart, the price of gold would soar.

    The economic news lately hasn’t been very good and it’s a signal that a good portion of the economy isn’t growing very much at all. There are some sectors with good fundamentals and large companies that are able to increase their prices without affecting demand. But, at the consumer level (employment, retail and housing prices), the picture is much different. At the industrial level, the recovery continues. At the retail level, stagnation remains.

    So, I repeat my view that equity investors don’t need to be in any rush to take action at this particular point in time. The market should continue to tread water until we get into second-quarter earnings season in just over a month. The fact that the S&P 500 Index is still well above 1,300 is a positive sign for equities.

    Retire on This One Hot Stock!

    This stock is up 232% since we first picked it. Our expert analysts say it will go up another 100% in the next 12 months! Our top 19 stock picks were up an average of 173.57% in 2010 (not a misprint). See where we are making money in 2011 and get our combined 100 years of investing experience working for you starting today.

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  • Why You Would Have Been Better Off Just Investing in Gold Over the Last 11 Years

    Posted on May 11th, 2011 Profit Confidential No comments

    By Mitchell Clark, B.Comm.

    Mitchell reveals why investors might have been better off just investing in gold over the last 11 years.Countless small companies are reporting their earnings now and, unscientifically, I can tell you that, in most cases, expectations are being met. But, like the large-cap stocks, there aren’t that many home runs out there on the earnings front. This is mostly due to tempered visibility for upcoming quarters. The earnings power this year will continue to be with large-caps, which is why the main stock market averages can keep ticking higher over the coming quarters, even though they’ve already gone up substantially since last summer.

    This is a market that’s trading off solid first-quarter earnings, a relaxation of sovereign debt worries in Europe (which doesn’t mean the threat is over), and mergers and acquisition news. Big companies are sitting on huge cash hoards, and the only way to put that money to work is to buy back shares and buy other companies. Large corporations are doing both right now and this is helping to maintain positive investor sentiment. In fact, investment banks are salivating.

    The rollercoaster in commodity prices is totally expected and called for. The speculative boom in commodity futures is both real and part of a bandwagon effect, but the action in this asset class isn’t going away. Real resources will continue to boom throughout the year and this is based on global fundamentals, the weather, and speculators.

    While both stocks and commodities are due for corrections, the trading action in stocks suggests to me that more incremental gains are likely. The Dow Jones Transportation Average, which is one of the most important gauges for the broader market, looked like it was breaking down in February and March, but has since recovered and is maintaining its upward momentum. With most of the big railroad stocks trading at all-time highs (not 52-week), this leading indicator is saying that it’s full steam ahead for equities.

    The right shoulder formation of the S&P 500 Index is becoming more and more complete every week and I think it’s highly likely that it will be complete within the next 12 months. Technically, this index would have to surpass 1,500 in order to get to the same level it was in 2000. That was 11 years ago—and all the stock market’s done since then is convulse. As always, if you’re on the right side of the trend, you’re making money. The buy-and-hold strategy in large-caps failed over the last 11 years and investors are only slightly ahead due to dividend payments. Frankly, we would have all been better off just buying gold bars. That would have saved a lot of headaches.

    We’re in a market of incremental returns, where investors are trading on news without a big catalyst. This trading action should stay with us for a while, at least until second-quarter earnings season begins. There aren’t any big tailwinds, but there doesn’t seem to be much in the way of headwinds either. It’s low and slow, just like the economy.

    Retire on This One Hot Stock!

    This stock is up 232% since we first picked it. Our expert analysts say it will go up another 100% in the next 12 months! Our top 19 stock picks were up an average of 173.57% in 2010 (not a misprint). See where we are making money in 2011 and get our combined 100 years of investing experience working for you starting today.

    Get your FREE report on our top stock pick immediately here.

    http://www.profitconfidential.com/pcabs/

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  • The Biggest Story’s the Biggest Companies—Why These Stocks Are Doing Great

    Posted on May 9th, 2011 Profit Confidential No comments

    By Mitchell Clark, B.Comm.

    Why the story this year continues to be with large-cap equities.

    The pull-back in commodity prices is a healthy development. No market benefits when prices go straight up without taking a break. I think we’ll find that the price of oil consolidates for a while, but it should reaccelerate in the bottom half of the year, as global economic growth takes over supply. There has been quite a bit of speculative fever on the part of institutional investors in the oil market and the big trade has gone away. Silver was ripe for a correction, as is gold now, although the spot price of gold continues to have a resilience that is outperforming other precious metals.

    The story this year continues to be with large-cap equities. Big corporations with global operations are benefitting from stronger currencies abroad and much stronger growth in Asia. In addition, the ability of a big corporation to control its costs really adds strength to the bottom line, even if revenue growth is stagnant. Companies like PepsiCo, Inc. (NYSE/PEP), DuPont (NYSE/DD) and Caterpillar Inc. (NYSE/CAT) are but a few global businesses that illustrate the point perfectly. These stocks are trading right at their 52-week highs—and the kicker is that they pay great dividends as well. This year, the speculative end of the equity market has seen great success in gold stocks. At the more conservative end of the market, global large-caps are cleaning house. It has been and will continue to be an excellent time to own the right large-cap stocks.

    I say the “right” stocks, because not all industries are experiencing the same degree of success as others. The key is to own a company that has global reach, will benefit from a weaker dollar, and has the pricing power to accelerate earnings more than the growth rate of revenues.

    Currently in this market, share prices are ripe for a correction or period of consolidation. But I would add that the outlook for corporate earnings over the coming quarter remains solid. Stock prices will always gyrate with the news of the day, but, fundamentally, business is looking pretty good.

    Over the coming quarters, investors can expect other central banks in Western countries to lift their interest rates and this will put pressure on the U.S. dollar. It will also put pressure on the Federal Reserve to become more hawkish with its interest-rate policy. There is more price inflation coming down the road and global capital markets will soon begin to squeeze the Fed ever so slowly.

    Currently, there’s no big rush to take much in the way of new action in a diversified equity portfolio. The broader market is likely to churn for a while and the economic data will be mixed. The key for investors is to focus on what corporations are saying in terms of earnings expectations and visibility. This has proven to work tremendously well in the recent past and will continue to do so for the rest of the year.

    Retire on This One Hot Stock!

    This stock is up 232% since we first picked it. Our expert analysts say it will go up another 100% in the next 12 months! Our top 19 stock picks were up an average of 173.57% in 2010 (not a misprint). See where we are making money in 2011 and get our combined 100 years of investing experience working for you starting today.

    Get your FREE report on our top stock pick immediately here.

    http://www.profitconfidential.com/pcabs/

    Share
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