At the beginning of the year it’s especially important to start off strong and find the investment areas that will firm your portfolio and add wealth to your profits. That’s why at this time I like to identify the areas of the market slated to do well in the upcoming months and year.
If you know the pros and cons of different sectors, as well their forecasted expectations, it becomes much easier to decide how and where to allocate your investment funds. Given what I already know about current economic and market conditions, and the predictions and expectations for coming quarters, I would like to share with you a couple of areas I believe will be great investment opportunities and profits in 2012.
Retail Is Here to Stay
If there’s one thing I know, it’s that people have to spend money. We’re a consumer-driven economy. And whether money is being spent on necessities or luxuries, the bottom line is it’s being spent — and that fact won’t be changing anytime soon.
That’s why I keep a constant eye on the retail sector. Now that consumers are beginning to have funds to dedicate to retail therapy again and spending numbers are improving, the retail sector looks even better from an investment standpoint. The latest monthly retail report shows that sales in November rose 4.5% year-over-year.
Traditionally, this time of year is when retailers really shine. The holiday shopping season boosts retail sales, and the fourth-quarter usually turns out to be the best for retailers. Also, with the January Effect taking hold of the market, you can expect the retail sector to have a strong start in 2012. Analysts currently expect 237.8% earnings growth for the retail sector in the Q1 2012.
So, if you don’t own any already, I suggest you consider adding a retail position or two to your portfolio.
Power Up Your Portfolio with Energy Stocks
Another sector that I can’t get enough of is energy. It’s another thing that modern society can’t survive without.
Like any other area, the energy industries are susceptible to economic and political factors. From rising fuel cost to federal regulations, lots of external forces are at play when it comes to the performance of energy stocks. But that doesn’t mean there aren’t always pockets of strength to be found in the sector.
What I like about the energy sector is that there’s no shortage of options. With energy stocks you aren’t limited to investing in a specific type of company or a particular area. Energy is a broad umbrella that covers extensive territory.
Whether you’re interested in oil, electricity, mining or some other industry, energy covers them all. Investors can find big-name oil companies like BP ( NYSE:BP) or corporations focusing on alternate energy sources like JA Solar Holdings (NASDAQ:JASO). The possibilities are unrestricted.
The analyst community expects the energy sector to finish off the year strong with 58.3% earnings growth in the current quarter. With energy prices moderating and ripe, new opportunities I suspect the sector will be brimming with great potential in the coming year.
Why I’m Still Weary of Financials
Since the Lehman Brothers bankruptcy in 2008, my weariness of the sector has proven wise. The financial sector has been in a mess over the last few years, causing chaos in virtually every aspect of our economy. But now that some time has passed and we’re seeing stable improvement in certain areas, I often receive messages and questions about my current outlook for the financial sector.
There’s no question that the the financial sector has improved as well. Across the various finance industries, steps are being made to reverse the downturn and get back some of their former glory. As of this writing, financials are expected to grow just 0.3%.
Growth is good, but a lot more needs to be done to change my opinion of the sector. Essentially, not nearly enough progress has been made for me to think that financials are safe investments, especially for investors looking for more stable, lasting opportunities. That isn’t to say that every financial stock out there is bad. Just as within the retail, energy and every other sector, good and bad stocks can be found.
I do think we’ll see the sector continue to gradually improve. My advice to anyone who owns financials or is thinking about investing in financial stocks is to hold off buying for now. A lot of work still must be done in the sector before stable growth will return. I recommend that you simply avoid the sector altogether.
